A history of political economy

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HISTORY OP
POLITICAL ECONOMY

A HISTORY

OF

POLITICAL ECONOMY

BY

JOHN KELLS INGRAM, LL.D.

FELLOW OF TRINITY COLLEGE, DUBLIN

SECOND EDITION

LONDON

ADAM AND CHAELES BLACK
1907

New edition, November, 1907.

PREFATORY NOTE.

THE object of the following pages is rather to exhibit
the historic development of economic thought in its re-
lations with general philosophic ideas than to give an
exhaustive account of economic literature. An attempt
has, however, been made, so far as was consistent with
the main design, to notice all the really important works
on the science. Readers who desire more detailed infor-
mation are referred to the under-mentioned books on the
history of Political Economy, almost all of which have
been more or less, and some very largely, used in the
preparation of the present work.

GENERAL HISTORIES. — Histoire de VEconomie Poli-
tique en Europe depuis les anciens jusqu'a nos jours, by
Jerome Adolphe Blanqui (1837-38); of which there is
an English translation by Emily J. Leonard (1880).
Histoire de VEconomie Politique, by Alban de Yilleneuve-
Bargemont (Brussels, 1839; Paris, 1841) ; written from
the Catholic point of view. View of the Progress of
Political Economy in Europe since the Sixteenth Century,
by Travers Twiss, D.C.L. (1847). Die geschichtliche
EntwicJcelung der National Oekonomik und ihrer
LiteratuTj by Julius Kautz (1860) ; a valuable
work, marked by philosophical breadth, and exhibiting
the results of extensive research, but too declamatory

PREFATORY NOTE.

in style; the book sadly wants an index. Kritische Ge~
schichte der National-okonomie und des Socialismus, by
Emile Diihring (1871; 3d ed. 1879); characterised by its
author's usual sagacity, but also by his usual perverse-
ness and depreciation of meritorious writers in his own
field. Guida olio studio delV Economia Politico,, by Luigi
Cossa (1876 and 1878; Eng. trans. 1880). Geschichte der
NationaloJconomik, by H. Eisenhart (1881); a vigorous
and original sketch. A brief but excellent history by H.
von Scheel in the Handbuch der politischen Oekonomie
(edited by Gustav Schonberg, 1882; 2d ed., enlarged and
improved, 1886). And, lastly, that prefixed to the
NationaloeJconomie of G. Cohn (1885), which had not ap-
peared at the time of the first publication of the present
work. To these histories proper must be added The
Literature of Political Economy , by J. E/. M'Culloch ( 1 845 ) ,
a book which might with advantage be re-edited, supple-
mented where imperfect, and continued to our own time.
Some of the biographical and critical notices by Eugene
Daire and others in the Collection des principaux JZcono-
mistes will also be found useful, as well as the articles in
the Dictionnaire de Vficonomie Politique of Coquelin and
Guillaumin (1852-53; 3d ed. 1864), which is justly
described by Jevons as "on the whole the best work of
reference in the literature of the science."

SPECIAL HISTORIES. — Italy. — Storia della Economia
Pubblica in Italia, ossia Epilogo critico degli Economisti
Italiani, by Count Giuseppe Pecchio (1829), intended as
an appendix to Baron Custodi's collection of the Scrittori
classici Italiani di Economia Politica, 50 vols., comprising
the writings of Italian economists from 1582 to 1804.
There is a French translation of Pecchio's work by

PREFATORY NOTE.

Leonard Gallois (1830). The book is not without value,
though often superficial and rhetorical.

Spain. — Storia della Economia Politico, in Espana
(1863), by M. Colmeiro; rather a history of economy than
of economics — of policies and institutions rather than of
theories and literary works.

Germany. — Geschichte der Nationalokonomik in Deutsch-
land (1874), by Wilhelm Roscher; a vast repertory of
learning on its subject, with occasional side-glances at
other economic literatures. Die neuere NationaloJconomie
in ihren Hauptrichtungen, by Moritz Meyer (3ded. 1882);
a useful handbook dealing almost exclusively with recent
German speculation and policy.

The Netherlands. — Geschichte der Volkswirthschaft-
lichen Anschanungen der Niederldnder und Hirer Littera-
tur (1863), by E. Laspeyres.

England. — Zur Geschichte der Englischen Volkswirth-
schaftslehre, by W. Eoscher (1851-52).

The reader is also advised to consult the articles in the
ninth edition of the Encyclopaedia Britannica which re-
late to the principal writers on political economy,
especially those on Petty, Quesnay, Turgot, Smith, Say,
and Ricardo. The present work, it should be stated, is
for the most part a reproduction of the article " Political
Economy," which appeared (1885) in volume xix. of the
Encyclopaedia Britannica.

HB
75

,152

CONTENTS.

PAGE
PREFATOKY NOTE ........ VU

CHAP. I. INTRODUCTORY I

" n. ANCIENT TIMES 7

" III. THE MIDDLE AGES 24

" IV. MODERN TIMES: FIRST AND SECOND PHASES . 32

' ' V. THIRD MODERN PHASE : SYSTEM OF NATURAL

LIBERTY 55

" VI. THE HISTORICAL SCHOOL . . . .196
" VII. CONCLUSION 240

HISTORY OF POLITICAL ECONOMY.

CHAPTER L
INTRODUCTORY.

IN the present condition of Political Economy, the production
of new dogmatic treatises on the subject does not appear to be
opportune. There are many works, accessible to every one,
in which, with more or less of variation in details, what
is known as the "orthodox" or "classical" system is ex-
pounded. But there exists in England and other countries wide-
spread dissatisfaction with that system, and much difference
of opinion with respect both to the method and the doctrines
of Economic Science. There is, in fact, good reason to
believe that this department of social theory has entered on
a transition stage, and is destined ere long to undergo a con-
siderable transformation. But the new body of thought
which will replace, or at leas^ profoundly modify, the old,
has not yet been fully elaborated. The attitude of mind
which these circumstances seem to prescribe is that of pause
and retrospection. It is thought that our position will be
rendered clearer and our further progress facilitated by
tracing historically, and from a general point of view, tb.t

2 POLITICAL ECONOMY.

course of speculation regarding economic phenomena, and con«
templating the successive forms of opinion concerning them
in relation to the periods at which they were respectively
evolved. And this is the task undertaken in the following
pages.

Such a study is in harmony with the best intellectual
tendencies of our age, which is, more than anything else,
characterised by the universal supremacy of the historical
Bpirit. To such a degree has this spirit permeated all our
modes of thinking, that with respect to every branch of
knowledge, no less than with respect to every institution and
every form of human activity, we almost instinctively ask,
not merely what is its existing condition, but what were its
earliest discoverable germs, and what has been the course of
its development 1 The assertion of J. B. Say1 that the
history of Political Economy is of little value, being for the
most part a record of absurd and justly exploded opinions,
belongs to a system of ideas already obsolete, and requires at
the present time no formal refutation.2 It deserves notice
only as reminding us that we must discriminate between
history and antiquarianism : what from the first had no
significance it is mere pedantry to study now. We need
concern ourselves only with those modes of thinking which
have prevailed largely and seriously influenced practice in
the past, or in which we can discover the roots of the present
and the future.

When we thus place ourselves at the point of view of
history, it becomes unnecessary to discuss the definition of
Political Economy, or to enlarge on its method, at the outset.
It will suffice to conceive it as the theory of social wealth,
or to accept provisionally Say's definition, which makes it

1 " Que pourrions-nous gagner a recueillir des opinions absurdes, dea
doctrines de'crie'es et qui meritent de l'6tre? II serait a la fois inutile
et fastidieux." £con. Pol. Pratique, IXme Partie. The "cependant"
which follows does not really modify this judgment.

2 See lloscher's Getchichte der National-alconomik in DeutscJdand,
Vorrede.

H

INTRODUCTORY. 3

*ne science of jthejprodjictionr distribution, and consumption
-Of .wealth. Any supplementary ideas which require to be
taken into account will be suggested in the progress of our
survey, and the determination of the proper method of economic
research will be treated as one of the principal results of
the historical evolution of the science.

The history of Political Economy must of course be dis-
tinguished from the economic history of mankind, or of any
separate portion of our race. The study of the successiQHi._of
economic facts themselves is one thing; the study of the
succession of theoretic ideas concerning the facts is another.
And it is with the latter alone that we are here directly
concerned. But these two branches of research, though dis-
tinct, yet stand in the closest relation to each other. The
rise and the form of economic doctrines have been largely
conditioned by the practical situation, needs, and tendencies
of the corresponding epochs. With each important social
change new economic questions have presented themselves;
and the theories prevailing in each period have owed much of
their influence to the fact that they seemed to offer solutions
of the urgent problems of the age. Again, every thinker,
however in some respects he may stand above or before his
contemporaries, is yet a child of his time, and cannot be
isolated from the social medium in which he lives and moves.
He will necessarily be affected by the circumstances which
surround him, and in particular by the practical exigencies of
which his fellows feel the strain. This connection of theory
with practice has its advantages and its dangers. It tends to
give a real and positive character to theoretic inquiry ; but it
may also be expected to produce exaggerations in doctrine, to
lend undue prominence to particular sides of the truth, and
to make transitory situations or temporary expedients be re-
garded as universally normal conditions.

There are other relations which we must not overlook in
tracing the progress of economic opinion. The several branches
of the science of society are so closely connected that the

4 POLITICAL ECONOMY.

history of no one of them can with perfect rationality be
treated apart, though such a treatment is recommended — indeed
necessitated — by practical utility. The movement of economic
thought is constantly and powerfully affected by the prevalent
mode of thinking, and even the habitual tone of sentiment,
on social subjects generally. All the intellectual manifesta-
tions of a period in relation to human questions have a kindred
character, and bear a certain stamp of homogeneity, which is
vaguely present to our minds when we speak of the spirit of
the age. Social speculation again, and economic research as
one branch of it, is both through its philosophic method and
through its doctrine under the influence of the sciences which
in the order of development precede the social, especially of
the science of organic nature.

It is of the highest importance to bear in mind these several
relations of economic research both to external circumstance
and to other spheres of contemporary thought, because by
keeping them in view we shall be led to form less absolute
and therefore juster estimates of the successive phases of
opinion. Instead of merely praising or blaming these accord-
ing to the degrees of their accordance with a predetermined
standard of doctrine, we shall view them as elements in an
ordered series, to be studied mainly with respect to their filia-
tion, their opportuneness, and their influences. We shall not
regard each new step in this theoretic development as implying
an unconditional negation of earlier views, which often had a
relative justification, resting, as they did, on a real, though
narrower, basis of experience, or assuming the existence of ft
different social order. Nor shall we consider all the theoretic
positions now occupied as definitive ; for the practical system of
life which they tacitly assume is itself susceptible of change,
and destined, without doubt, more or less to undergo it.
Within the limits of a sketch like the present these considera-
tions cannot be fully worked out ; but an effort will be made
to keep them in view, and to mark the relations here indicated,
wherever their influence is specially important or interesting.

INTRODUCTORY. 5

The particular situation and tendencies of the several
thinkers whose names are associated with economic doctrines
have, of course, modified in a greater or less degree the spirit
or form of those doctrines. Their relation to special prede-
cessors, their native temperament, their early training, their
religious prepossessions and political partialities, have all had
their effects. To these we shall in some remarkable instances
direct attention ; but, in the main, they are, for our present
purpose, secondary and subordinate. The ensemble must pre-
ponderate over the individual ; and the constructors of theories
must be regarded as organs of a common intellectual and social
movement.

The history of economic inquiry is most naturally divided
into the three great periods of (i) the ancient, (2) the mediaeval,
and (3) the modern worlds. In the two former, this branch
of study could exist only in a rudimentary state. It is evident
that for any considerable development of social theory two
conditions must be fulfilled. First, the phenomena must have
exhibited themselves on a sufficiently extended scale to supply
adequate matter for observation, and afford a satisfactory basis
for scientific generalisations ; and secondly, whilst the spectacle
is thus provided, the spectator must have been jtrainjgd for his
task, and armed with the appropriate aids and instruments of
research, that is to say, there must have been such a previous
cultivation of the simpler sciences as will have both furnished
the necessary data of doctrine and prepared the proper methods
of investigation. Sociology requires to use for its purposes
theorems which belong to the domains of physics and biology,
and which it must borrow from their professors ; and, on the
logical side, the methods which it has to employ — deductive,
observational, comparative — must have been previously shaped
in the cultivation of mathematics and the study of the
inorganic world or of organisms less complex than the social
Hence it is plain that, though some laws or tendencies of
society must have been forced on men's attention in every age
by practical exigencies which could not be postponed, and

6 POLITICAL ECONOMY.

though the questions thus raised must have received some
empirical solution, a really scientific sociology must be the
product of a very advanced stage of intellectual development.
And this is true of the economic, as of other branches of social
theory. We shall therefore content ourselves with a general
outline of the character of economic thought in antiquity and
the Middle Ages, and of the conditions which determined that
character.

CHAPTER IL
ANCIENT TIMES.

THB earliest surriving expressions of thought on economic
subjects have come down to us from the Oriental theocracies.
The general spirit of the corresponding type of social life con-
sisted in taking imitation_Jor the fundamental principle of
education, and consolidating nascent civilisation by heredity
of the different functions and professions, or even by a system
of castes, hierarchically subordinated to each other according
to the nature of their respective offices, under the common
supreme direction of the sacerdotal caste. This last was
charged with the traditional stock of conceptions, and their
application for purposes of discipline. It sought to realise a
complete regulation of human life in all its departments on
the basis of this transmitted body of practical ideas. Con-
servation is the principal task of this social order, and its most
remarkable quality is stability, which tends to degenerate into
stagnation. But there can be no doubt that the useful arts
were long, though slowly, progressive under this regime, from
which they were inherited by the later civilisations,— the
system of classes or castes maintaining the degree of division
of labour which had been reached in those early periods. The
leading members of the corporations which presided over the
theocracies without doubt gave much earnest thought to the
conduct of industry, which, unlike war, did not imperil their
political pre-eminence by developing a rival class. But, con-
ceiving life as a whole, and making its regulation their primary
aim, they naturally considered most the social reactions which

8 POLITICAL ECONOMY.

industry is fitted to exercise. The moral side of _ecQDomlca_ifl
the one they habitually contemplate, or (what is not the same)
the economic side of morals. They abound in those warnings
against greed and the haste to be rich which religion and
philosophy have in all ages seen to be necessary. They insist
on honesty in mutual dealings, on just weights and measures,
on the faithful observance of contracts. They admonish against
the pride and arrogance apt to be generated by riches, against
undue prodigality and self-indulgence, and enforce the duties
of justice and beneficence towards servants and inferiors.
Whilst, in accordance with the theological spirit, the personal
acquisition of wealth is in general thesis represented as deter-
mined by divine wills, its dependence on individual diligence
and thrift is emphatically taught. There is indeed in the fully
developed theocratic systems a tejadfincy. to carry precept,
which there differs little from command, to^an excessive degree
of minuteness, — to prescribe in detail the time, the mode, and
the accompaniments of almost every act of every member of
the community. This system of exaggerated surveillance is
connected with the union, or rather confusion, of the spiritual
and temporal powers, whence it results that many parts of the
government of society are conducted by direct injunction or
restraint, which at a later stage are intrusted to general intel-
lectual and moral influences.

The practical economic enterprises of Greek and Roman
antiquity could not, even independently of any special adverse
influences, have competed in magnitude of scale or variety of
resource with those of modern times. The ujiadvajicjed con-
dition of physical science prevented a large application of the
less obvious natural powers to production, or the extensive
use of machinery, which has acquired such an immense
development as a factor in modern industry. The imper-
fection of geographical knowledge and of the means of com-
munication and transport were impediments to the growth
of foreign commerce. These obstacles arose necessarily out
of the mere immaturity of the industrial life of the periods in

ANCIENT TIMES. 9

question. But more deeply rooted impediments to a vigorous
and expansive economic practical system existed in the char-
acteristic principles of the civilisation of antiquity. Some
writers have attempted to set aside the distinction between
the ancient and modern worlds as imaginary or unimportant^
and, whilst admitting the broad separation between ourselves
and the theocratic peoples of the East, to represent the Greeks
and Komans as standing on a substantially similar ground of
thought, feeling, and action with the Western populations of
our own time. But this is a serious error, arising from the
same too exclusive pre-occupation with the cultivated classes
and with the mere speculative intellect which has often led
to an undue disparagement of the Middle Ages. There is
this essential difference between the spirit and life of ancient
and of modern communities, that the former were organised
Jfor war, the latter during their whole history have increasingly
tended to be organised Jor indusiiy, as their practical end and
aim. The profound influence of these differing conditions on
every form of human activity must never be overlooked or
forgotten. With the military constitution of ancient societies
the institution of slavery was essentially connected. Far from
being an excrescence on the contemporary system of life, as
it was in the modern West Indies or the United States of
America, it was so entirely in harmony with that life that the
most eminent thinkers regarded it as no less indispensable
than inevitable. It does, indeed, seem to have been a tem-
porary necessity, and on the whole, regard being had to what
might have taken its place, a relative good. But it was
attended with manifold evils. It led to the prevalence
amongst the citizen class of a contempt for industrial occupa-
tions ; every form of production, with a partial exception in
favour of agriculture, was branded as unworthy of a free man,
— the only noble forins^ of activity being those directly con-
nected with public life, whether military or administrative.
Labour was degraded by the relegation of most departments
of it to the servile class, above whom the free artisans were

io POLITICAL ECONOMY.

but little elevated in general esteem. The producers being
thus for the most part destitute of intellectual cultivation and
excluded from any share in civic ideas, interests, or efforts,
were unfitted in character as well as by position for the habits
of skilful combination and vigorous initiation which the prog-
ress of industry demands. To this must be added that the
comparative insecurity of life and property arising out of
military habits, and the consequent risks which attended
accumulation, were grave obstructions to the formation of
large capitals, and to the establishment of an effective system
of credit. These causes conspired with the undeveloped state
of knowledge and of social relations in giving to the economic
life of the ancients the limitation and monotony which con-
trast so strongly with the inexhaustible resource, the ceaseless
expansion, and the thousandfold variety of the same activities
in the modern world. It is, of course, absurd to expect in-
compatible qualities in any social system ; each system must
be estimated according to the work it has to do. Now the
historical vocation of the ancient civilisation was to be accom-
plished, not through industry, but through war, which was in
the end to create a condition of things admitting of its own
elimination and of the foundation of a regime based on pacific
activity.

THE GREEKS.

This office was, however, reserved for Rome, as the final
result of her system of conquest; the military activity of
Greece, though continuous, was incoherent and sterile, except
in the defence against Persia, and did not issue in the accom-
plishment of any such social mission. It was, doubtless, the
inadequacy of the warrior life, under these conditions, to
absorb the faculties of the race, that threw the energies of its
most eminent members into the channel of intellectual activity,
and produced a singularly rapid evolution of the aesthetic,
philosophic, and scientific germs transmitted by the theocratic
societies.

ANCIENT TIMES. n

In the Works and Days of Hesiod, we find an order of
thinking in the economic sphere very similar to that of the
theocracies. With a recognition of the divine disposing power,
and traditional rules of sacerdotal origin, is combined practical
sagacity embodied in precept or proverbial saying. But the
development of abstract t.Vi might, beginning from the time of
Thales. soon gives to Greek culture its characteristic form, and
marks a new epoch in the intellectual history of mankind.

The movement was now begun, destined to mould the
whole future of humanity, which, gradually sapping the old
hereditary structure of theological convictions, tended to the
substitution of rational theories in every department of specu-
lation. The eminent Greek thinkers, while taking a deep
interest in the rise of positive science, and most of them study-
ing the only science — that of geometry — then assuming its
definitive character, were led by the social exigencies which
always powerfully affect great minds to study with special
care the nature of man and the conditions of his existence in
society. These studies were indeed essentially premature ; a
long development of the inorganic and vital sciences was
necessary before sociology or morals could attain their normal
constitution. But by their prosecution amongst the Greeks
a noble intellectual activity was kept alive, and many of those
partial lights obtained for which mankind cannot afford to
wait. Economic inquiries, along with others, tended towards
rationality ; Plutus was dethroned, and terrestrial substituted
for supernatural agencies. But such inquiries, resting on no
sufficiently large basis of practical life, could not attain any
considerable results. The military constitution of society, and
the Qxj^tejn^^of^slavery, which was related to it, leading, as
we have seen, to a low estimate of productive industry,
turned away the habHuaLjJttention of thinkers from that
domain. On the other hand, the absorption of citizens in the
life of the state, and their pre-occupation with party struggles,
brought questions relating to politics, properly so called, into
special prominence. The principal writers on social subjects

12 POLITICAL ECONOMY.

are therefore almost exclusively occupied with the examination
and comparison of political constitutions, and with the search
after the education best adapted to train the citizen for public
functions. And we find, accordingly, in them no systematic 01
adequate handling of economic questions, — only some happy
ideas and striking partial anticipations of later research.

In their thinking on such questions, as on all sociological
subjects the following general features are observable.

1. The individual is conceived as subordinated to the state,
through which alone his nature can be developed and com-
pleted, and to the maintenance and service of which all
his efforts must be directed. The great aim of all political
thought is the formation of good citizens; every socialjjuejs-
tion is studied primarily from the ethical and educational
point of view. The citizen is not regarded as a producer, but
only as a possessor, of material wealth ; and this wealth ia not
esteemed for its own sake or for the enjoyments it procures,
but for the higher moral and public aims to which it may be
made subservient.

2. The_state, therefore, claims and exercises a controlling
and regulating authority over every sphere of social life,
including the economic, in order to bring individual action
into harmony with the good of the whole.

3. With these fundamental notions is combined a tendency
to attribute tg_. institutions and to legislation an unlimited
efficacy, as if society had no spontaneous tendencies, but
would obey any external impulse, if impressed upon it with
sufficient force and continuity.

Every eminent social speculator had his ideal state, which
approximated to or diverged from the actual or possible,
according to the degree in which a sense of reality and a
positive habit of thinking characterised the author.

The most celebrated of these ideal systems is that of Plata

^ •• •«*— M^ag^^^^T

In it the idea of the subordination . ...of . the ^individual to the
state appears in its most extreme form. Within that class of
the citizens of his republic who represent the highest type of

ANCIENT TIMES. 13

®8. Is established, as
the most effective means of suppressing the sense of private
interest, and consecrating the individual entirely to the public
service. It cannot perhaps be truly said that his scheme was
incapable of realisation in an ancient community favourably
situated for the purpose. But it would soon be broken to
pieces by the forces which would be developed in an industrial
society. It has, however, been the fruitful parent of modern
Utopias, specially attractive as it is to minds in which the
literary instinct is stronger than the scientific judgment, in
consequence of the freshness and brilliancy of Plato's exposi-
tion and the unrivalled charm of his style. Mixed with what
we should call the chimerical ideas in his work, there are
many striking and elevated moral conceptions, and, what is
more to our present purpose, some just economic analyses. In
particular, he gives a correct account of the division and com-
bination of employments, as they naturally arise in society.
The foundation of the social organisation he traces, perhaps,
too exclusively to economic grounds, not giving sufficient
weight to the disinterested social impulses in men which tend
to draw and bind them together. But he explains clearly how
the different wants and capacities of individuals demand and
give rise to mutual services, and how, by the restriction of
each to the sort of occupation to which, by his position,
abilities, and training, he is best adapted, everything needful
for the whole is more easily and better produced or effected.
In the spirit of all the ancient legislators he flftsirfig a sp.lf.
sufficing state, protected from unnecessary contacts with
foreign populations, which might tend to break down its
internal organisation or to deteriorate the national character.
Hence he discountenances foreign trade, and with this view
removes his ideal city to some distance from the sea. The
limits of its territory are rigidly fixed, and the population is
restricted by the prohibition of early marriages, by the ex-
posure of infants, and by the maintenance of a determinate
number of individual lots of land in the hands of the citizens

I4 POLITICAL ECONOMY.

who cultivate the soil. These precautions are inspired more
by political and moral motives than by the Malthusian feai
of failure of subsistence. Plato aims, as far as possible, at
equality of property amongst the families of the community
which are engaged in the immediate prosecution of industry.
This last class, as distinguished from the governing aiTd
military classes, he holds, according to the spirit of his age, in
but little esteem ; he regards their habitual occupations as
tending to the degradation of_the^mind_and the enfeeblement
of the body, and rendering those who follow them unfit for
the higher duties of men and citizens. The lowest forms of
labour he would commit to foreigners and slaves. Again, in
the spirit of ancient theory, he wishes (Legg., v. 12) to banish
the precious metals, as far as practicable, from use in internal
commerce, and forbids the lending of money on interest,
leaving indeed to the free will of the debtor even the repay-
ment of the capital of the loan. All economic dealings he
subjects to active control on the part of the Government, not
merely to prevent violence and fraud, but to check the growth
of luxurious habits, and secure to the population of the state
a due supply of the necessaries and comforts of life.

Contrasted with the exaggerated idealism of Plato is the
somewhat limited but eminently practical genius of Xenophpn.
In him the man of action predominates, buf he has also a large
element of the speculative tendency and talent of the Greek.
His treatise entitled CEconomicus is well worth reading for the
interesting and animated picture it presents^ some aspects of
contemporary life, and is justly praised by Sismondi for the
spirit of mild philanthropy and tender piety which breathes
through it But it scarcely passes beyond the bounds of
domestic economy, though within that limit its author
exhibits much sound sense and sagacity. His precepts for
the judicious conduct of private property do not concern us
here, nor his wise suggestions for the government of the
family and its dependants. Yet it is in this narrower sphere
and in general in the concrete domain that his chief excellence

ANCIENT TIMES. 15

lies; to economics in their wider aspects he does not con-
tribute much. He shares the ordinary preference of his fellow-
countrymen for agriculture over other employments, and is,
indeed, enthusiastic in his praises of it as promoting patriotic
and religious feeling and a respect for property, as furnishing
the best preparation for military life, and as leaving sufficient
time and thought disposable to admit of considerable intel-
lectual and political activity. Yet his practical sense leads
him to attribute greater importance than most other Greek
writers to manufactures, and still more to trade, to enter more
largely on questions relating to their conditions and develop-
ment, and to bespeak for them the countenance and protection
of the state. Though his views on the nature of money are
vague, and in some respects erroneous, he sees that its export
in exchange for commodities will not impoverish the com-
munity. He also insists on the necessity, with a view to
a flourishing commerce with other countries, of peace, of a
courteous and respectful treatment of foreign traders, and of a
prompt and equitable decision of their legal suits. Thejaati-
tution of slavery he of course recognises and does not dis-
approve ; he even recommends, for the increase of the Attic
revenues, the hiring out of slaves by the state for labour in
the mines, after branding them to prevent their escape, the
number of slaves being constantly increased by fresh purchases
out of the gains of the enterprise. (De Vect.t 3, 4.)

Almost the whole system of Greek ideas up to the time
of 4fl3teiiS»^s rePresen^e(^ in his encyclopaedic construction.
Mathematical and astronomical science was largely developed
at a later stage, but in the field of social studies no higher
point was ever attained by the Greeks than is reached in the
writings of this great thinker. Both his gifts and his situa-
tion eminently favoured him in the treatment of these
subjects. He combined in rare measure a capacity for keen
observation with generalising power, and sobriety of judgment
with ardour for the public good. All that was original 01
significant in the political life of Hellas had run its course

16 POLITICAL ECONOMY.

before his time or under his own eyes, and he had thus a laig«
basis of varied experience on which to ground his conclusions.
Standing outside the actual movement of contemporary public
life, he occupied the position of thoughtful spectator and
impartial judge. He could not, indeed, for reasons already
stated, any more than other Greek speculators, attain a fully
normal attitude in these researches. Nor could he pasa
beyond the sphere of what is now called statical sociology;
the idea of laws of the historical development of socTal
phenomena he scarcely apprehended, except in some small
degree in relation to the succession of political forms. But
there is to be found in his writings a remarkable body of
sound and valuable thoughts on the constitution and work-
ing of the social organism. The special notices of economic
subjects are neither so numerous nor so detailed as we should
desire. Like all the Greek thinkers, he recognises but one
doctrine of the state, under which ethics, politics proper, and
economics take their place as departments, bearing to each
other a very close relation, and having indeed their lines of
demarcation from each other not very distinctly marked.
"When wealth comes under consideration, it is studied not as
an end in itself, but with a view to the higher elements and
ultimate aims of the collective life.

/'The origin of society he. traces, not to economic necessities,
•but to natural social impulses in the human constitution
/ The nature of the social union, when thus established, being
I determined by the partly spontaneous partly systematic com-
/ bination of diverse activities, he respects the independence of the
J latter whilst seeking to effect their convergence. He therefore
I opposes himself to the suppression of personal freedom and
initiative, and the excessive sujio^^m^j^n^jbhe^n^iyj^dual to
V the state, and rejects the community of property and wives
)roposed by Plato for his governing class. The principle of
private property he regards as deeply rooted in man, and the
evils which are alleged to result from the corresponding social
ordinance he thinks ought really to be attributed either to the

ANCIENT TIMES. 17

imperfections of our nature or to the vices of other public
institutions. Community of goods must, in his view, tend to
neglect of the common interest and to the disturbance of social
harmony.

/ Of the several classes which provide for the different wants f
/fif the society, those who are occupied directly with its material /
T needs — the immediate cultivators of the soil, the mechanics and \
I artificers — are excluded from any share in the government of (
the state, as being without the necessary leisure and cultivation, '
and apt to be debased by the nature of their occupations. In
a celebrated passage he propounds a theory of slavery, in which
it is based on the universality of the relation between command
and obedience, and on the natural division by which the ruling
is marked off from the subject race. He regards the slave aiT|
having no independent will, but as an " animated tool " in the \
hands of his master ; and in his subjection to such control, if C
only it be intelligent, Aristotle holds that the true \vell-beingy
of the inferior as well as of the superior is to be found. This
view, so shocking to our modern sentiment, is of course not
personal to Aristotle ; it is simply the theoretic presentation
of the facts of Greek life, in which the existence of a body of
citizens pursuing the higher culture and devoted to the tasks
of war and government was founded on the systematic degra-
dation of a wronged and despised class, excluded from all the
higher offices of human beings and sacrificed to the mainten-
ance of a special type of society.

The methods of economic acquisition are divided by Aristotle
into two, one of which has for its aim the appropriation of
Hftfajrfl] prnr^nfrpjmd their application to the material uses j)f
the household ; (under this head come hunting, fishing, cattle-
rearing, and agriculture. ) With this primary and " natural "
method is, in some sense, contrasted the^.jDther to which
Aristotle gives the name of " chrematistic/fm which an active
exchange of products goes on, and money comes into opera-
tion as its medium and regulators A certain measure of this
" non-natural " method, as it may be termed in opposition to

i8 POLITICAL ECONOMY.

the preceding and simpler form of industrial life, is accepted
by Aristotle as a necessary extension of the latter, arising out
of increased activity of intercourse, and satisfying real wants.
But its development on the great scale, founded on the thirst
for enjoyment and the unlimited desire of gain, he condemns
as unworthy and corrupting. Though his views on this subject
appear to be principally based on moral grounds, there are
some indications of his having entertained the erroneous opinion
held by the physiocrats of the eighteenth century, that agri-
culture alone (with the kindred arts above joined with it) is
truly productive, whilst the other kinds of industry, which
either modify the products of nature or distribute them by
way of exchange, however convenient and useful they may be,
make no addition to the wealth of the community.

He rightly regards money as altogetherjifferent from wealth,
illustrating the difference by the story of Midas. And he
seems to have seen that money, though its use rests on a social
convention, mustjbe composed of a material possessing an
independent ya^e_oj[ ttsjown,.. That his views on capital were
indistinct appears from his famous argument against interest
on loans, which is based on the idea that money is barren and
cannot jttoducejnonej.

Like the other Greek social philosophers, Aristotle recom-
mends to the care of Governments the preservation of a due
proportion between the extent of the civic territory and its
population, and relies on ante-nuptial continence, late marriages,
and the prevention or destruction of births for the due limita-
tion of the number of citizens, the insufficiency of the latter
being dangerous to the independence and its superabundance
to the tranquillity and good order of the state.

THE ROMANS.

Notwithstanding the eminently practical, realistic, and utili-
tarian character of the Romans, there was no energetic exercise
of their powers in the economic field; they developed no

ANCIENT TIMES. 19

large and many-sided system of production and exchange.
Their historic mission was military and political, and the
national energies were mainly devoted to the public service
at home and in the field. To agriculture, indeed, much
attention was given from the earliest times, and on it was
founded the existence of the hardy population which won
the first steps in the march to universal dominion. But in
the course of their history the cultivation of the soil by a
native yeomanry gave place to the introduction, in great
numbers, of slave labourers acquired by their foreign con-
quests ; and for the small properties of the earlier period were
substituted the vast estates — the latifundia — which, in the
judgment of Pliny, were the ruin of Italy.1 The industrial
arts and commerce (the latter, at least when not conducted on
a great scale) they regarded as ignoble pursuits, unworthy of
free citizens ; and this feeling of contempt was not merely a
prejudice of narrow or uninstructed minds, but was shared by
Cicero and others among the most liberal spirits of the nation.1
As might be expected from the want of speculative originality
among the Romans, there is little evidence of serious theoretic
inquiry on economic subjects. Thejr_Meas_ on these as on
other social questions were for the most part borrowed from
the Greek thinkers. Such traces of economic thought as do
occur are to be found in (i}_the philosophers, (2) the writers
de re rustica, and (3) the jurists. It must, however, be ad-
mitted that many of the passages in these authors referred to
by those who assert the claim of the Romans to a more pro-
minent place in the history of the science often contain only
obvious truths or vague generalities.

1 "Locis, quse nunc, vix seminario exiguo militum relicto, servitia
Romana ab solitudine vindicant." — Liv. vi. 12. "Villarum infinita
•patia." Tac. Ann. iii. 53.

3 "Opifices omnes in sordida arte versantur; nee enim quidquam
ingenuum habere potest officina. " Cic. de Off. i. 42. " Mercatura, si
teuuis est, sordida putanda est : sin magna et copiosa, multa undique
apportans multisque sine vanitate impertiens, non est admodum vituper-
•nda."— Ibid. " Quaestus oranis Patribus indecorus visus est." Liv. xxi. 63.

20 POLITICAL ECONOMY.

In the philosophers, whom Cicero, Seneca, and the eldei
Pliny sufficiently represent (the last indeed being rather a
learned encyclopaedist or polyhistor than a philosopher), we
find a general consciousness of the decay of industry, the
relaxation of morals, and the growing spirit of self-indulgence
amongst their contemporaries, who are represented as deeply
tainted with the imported vices of the conquered nations.
This sentiment, both in these writers and in the poetry and
miscellaneous literature of their times, is accompanied by a
half -factitious enthusiasm for agriculture and an exaggerated
estimate of country life and of early Roman habits, which are
principally, no doubt, to be regarded as a form of protest
against existing abuses, and, from this point of view, remind
us of the declamations of Rousseau in a not dissimilar age.
But there is little of large or just thinking on the prevalent
economic evils and their proper remedies. Pliny, still further
in the spirit of Rousseau, is of opinion that the introduction
of gold as a medium of exchange was a thing to be deplored,
and that the age of barter was preferable to that of money.
He expresses views on the necessity of preventing the efflux
of money similar to those of the modern mercantile school —
views which Cicero ako, though not so clearly, appears to
have entertained. Cato^Varro, and Columella concern them-
selves more with the technical precepts of husbandry than
with the general conditions of industrial success and social
well-being. But the two last named have the great merit of
having seen and proclaimed the superior value ofjree to slave
labour, and Columella is convinced that to the use of the
latter the decline of the agricultural economy of the Romans
was in a great measure to be attributed. These three writers
agree in the belief that it was chiefly by the revival and reform
of agriculture that the threatening inroads of moral corruption
could be stayed, the old Roman virtues fostered, and the
foundations of the commonwealth strengthened, Their atti-
tude is thus similar to that of the French physiocrats invok-
ing the improvement and zealous pursuit of agriculture alike

ANCIENT TIMES. 21

against the material evils and the social degeneracy of their
time. The question of the comparative merits of the large
and small systems of cultivation appears to have been much
discussed in the old Roman, as in the modern European
world ; Columella is a decided advocate of the petite culture.
The jurists were led by the coincidence which sometimes
takes place between their point of view and that of economic
science to make certain classifications and establish some more
or less refined distinctions which the modern economists have
either adopted from them or used independently. They appear
also (though this has been disputed, Keri and Carli maintain-
ing the affirmative, Pagnini the negative) to have had correct
notions of the nature of money as having a value of its own,
determined by economic conditions, and incapable of being
impressed upon it by convention or arbitrarily altered by
public authority. But in general we find in these writers, as
might be expected, not so much the results of independent
thought as documents illustrating the facts of Roman economic
life, and the historical policy of the nation with respect to
economic subjects. From the latter point of view they are
of much interest ; and by the information they supply as to
the course of legislation relating to property generally, to
sumptuary control, to the restrictions imposed on spendthrifts,
to slavery, to the encouragement of population, and the like,
they give us much clearer insight than we should otherwise
possess into influences long potent in the history of Rome and
of the Western world at large. But, as it is with the more
limited field of systematic thought on political economy that
we are here occupied, we cannot enter into these subjects.
One matter, however, ought to be adverted to, because it was
not only repeatedly dealt with by legislation, but is treated
more or less fully by all Roman writers of note, namely, the
interest on money loans. The rate was fixed by the laws of
the Twelve Tables; but lending on interest was afterwards
(B.C. 341) entirely prohibited by the Genucian Law. In the
legislation of Justinian, rates were sanctioned varying from

2* POLITICAL ECONOMY.

four to eight per cent, according to the nature of the case, the
latter being fixed as the ordinary mercantile rate, whilst com-
pound interest was forbidden. The Roman theorists, almost
without exception, disapprove of lending on interest altogether.
Cato, as Cicero tells us, thought it as bad as murder (" Quid
fenerari? Quid hominem occidere?" De Off. ii. 25); and
Cicero, Seneca, Pliny, Columella all join in condemning it.
It is not difficult to see how in early states of society the
trade of money-lending becomes, and not unjustly, the object
of popular odium; but that these writers, at a period when
commercial enterprise had made considerable progress, should
continue to reprobate it argues very imperfect or confused
ideas on the nature and functions of capital It is probable
that practice took little heed either of these speculative ideas
or of legislation on the subject, which experience shows can
always be easily evaded. The traffic in money seems to have
gone on all through Roman history, and the rate to have
fluctuated according to the condition of the market.

Looking back on the history of ancient economic specula-
tion, we see that, as might be anticipated a priori, the results
attained in that field by the Greek and Roman writers were
very scanty. As Diihring has well remarked, the questions
with which the science has to do were regarded by the ancient
'thinkers rather from their political than their properly eco-
nomic side. This we have already pointed out with respect
to their treatment of the subject of population, and the same
may be seen in the case of the doctrine of the division of
labour, with which Plato and Aristotle are in some degree
occupied. They regard that principle as a basis of social
classification, or use it in showing that society is founded on
a spontaneous co-operation of diverse activities. From the
strictly economic point of view, there are three important
propositions which can be enunciated respecting that division :
— (i) that its extension within any branch of production
makes the products cheaper; (2) that it is limited by the
extent of the market ; and (3) that it can be carried furthei

ANCIENT TIMES. 23

in manufactures than in agriculture. But wo shall look in
vain for thesvj propositions in the ancient writers ; the first
alone might be inferred from their discussions of the subject.
It has been the tendency especially of German scholars to
magnify unduly the extent and value of the contributions of
antiquity to economic knowledge. The Greek and Roman
authors ought certainly not to be omitted in any account of
the evolution of this branch of study. But it must be kept
steadily in view that we find in them only first hints or rudi-
ments of general economic truths, and that the science is
essentially a modern one. We shall indeed see hereafter that
it could not have attained its definitive constitution before oui
own time.1

iQn the Economic doctrines of the Ancients seeRoscher's Essay Ueber
das Verhaltniss der Nationalokonomie zuin klassischen Alterthume in
his Ansichten der Volkswirthschaft (1861).

CHAPTER HI.
THE MIDDLE AGES.

THE Middle Ages (400-1300 A.D.) form a period of great
significance in the economic, as in the general, history of
Europe. They represent a vast transition, in which the germs
of a new world were deposited, but in which little was fully
elaborated. There is scarcely anything in the later movement
of European society which we do not find there, though
as yet, for the most part, crude and undeveloped. The
mediaeval period was the object of contemptuous depreciation
on the part of the liberal schools of the last century, prin-
cipally because it contributed so little to literature. But
there are things more important to mankind than literature ;
and the great men of the Middle Ages had enough to do in
other fields to occupy their utmost energies. The develop-
ment of the Catholic institutions and the gradual establishment
and maintenance of a settled order after the dissolution of the
Western empire absorbed the powers of the thinkers and
practical men of several centuries. The first mediaeval phase,
from the commencement of the fifth century to the end of the
seventh, was occupied with the painful and stormy struggle
towards the foundation of the new ecclesiastical and civil
system ; three more centuries were filled with the work of its
consolidation and defence against the assaults of nomad popula-
tions '} only in the final phase, during the eleventh, twelfth, and
thirteenth centuries, when the unity of the West was founded
by the collective action against impending Moslem invasion, did

THE MIDDLE AGES. 25

it enjoy a sufficiently secure and stable existence to exhibit
its essential character and produce its noblest personal types.
The elaboration of feudalism was, indeed, in progress during
the whole period, showing itself in the decomposition of
power and the hierarchical subordination of its several grades,
the movement being only temporarily suspended in the second
phase by the salutary dictatorship of Charlemagne. But not
before the first century of the last phase was the feudal system
fully constituted. In like manner, only in the final phase
could the effort of Catholicism after a universal discipline be
carried out on the great scale — an effort for ever admirable,
though necessarily on the whole unsuccessful.

No large or varied economic activity was possible under the
full ascendency of feudalism. That organisation, as has been
abundantly shown by philosophical historians, was indispens-
able for the preservation of order and for public defence, and
contributed important elements to general civilisation. But,
whilst recognising it as opportune and relatively beneficent,
we must not expect from it advantages inconsistent with its
essential nature and historical office. The class which pre-
dominated in it was not sympathetic with industry, and held
the handicrafts in contempt, except those subservient to war
or rural sports. The whole practical life of the society was
founded on t^rriiorial property ; the wealth of the lord con-
sisted in the produce of his lands and the dues paid to him in
kind ; this wealth was spent in supporting a body of retainers
whose services were repaid by their maintenance. There
could be little room for manufactures, and less for commerce ;
and agriculture was carried on with a view to the wants of
the family, or at most of the immediate neighbourhood, not
to those of a wider market. The economy of the period was
therefore^siniple, and, in the absence of special motors from
without, unprogressive.

In the latter portion of the Middle Ages several circum-
stances came into action which greatly modified these con-
ditions. The Crusades undoubtedly produced a powerful

26 POLITICAL ECONOMY.

economic effect by transferring in many cases the possessions
of the feudal chiefs to the industrious classes, whilst by
bringing different nations and races into contact, by enlarging
the horizon and widening the conceptions of the populations,
as well as by affording a special stimulus to navigation, they
tended to give a new activity to international trade. The
independence of the towns and the rising importance of the
burgher class supplied a counterpoise to the power of the land
aristocracy; and the strength of these new social elements
was increased by the corporate constitution given to the
urban industries, the police of the towns being also founded
on the trade guilds, as that of the country districts was on the
feudal relations. The increasing demand of the towns for the
products of agriculture gave to the prosecution of that art a
more extended and speculative character ; and this again led
to improved methods of transport and communication. But
the range of commercial enterprise continued everywhere
narrow, except in some favoured centres, such as the Italian
republics, in which, however, the growth of the normal habits
of industrial life was impeded or perverted by military ambi-
tion, which was not, in the case of those communities, checked
as it was elsewhere by the pressure of an aristocratic class.

Every great change of opinion on the destinies of man
and the guiding principles of conduct must react on the
sphere of material interests ; and the Catholic religion had a
powerful influence on the economic life of the Middle Ages.
Christianity inculcates, perhaps, no more effectively than the
older religions the special economic virtues of industry, thrift,
fidelity to engagements, obedience to rightful authority ; but
it brought out more forcibly and presented more persistently
the higher aims of life, and so produced a more elevated way
of viewing the different social relations. It purified domestic
life, a reform which has the most important economic results.
It taught the doctrine of fundamental human equality,
heightened the dignity of labour, and preached with quite
a new emphasis the obligations of love, compassion, and

THE MIDDLE AGES. »7

forgiveness, and the claims of the poor. The constant pre-
sentation to the general mind and conscience of these ideas,
the dogmatic bases of which were scarcely as yet assailed by
scepticism, must have had a powerful effect in moralising life.
But to the influence of Christianity as a moral doctrine was
added that of the Church as an organisation, charged with
the application of the doctrine to men's daily transactions.
Besides the teachings of the sacred books, there was a mass
of ecclesiastical legislation providing specific prescriptions for
the conduct of the faithful. And this legislation dealt with
the economic as with other provinces of social activity. In
the Corpus Juris Canonici, which condenses the result of
centuries of study and effort, along with much else is set out
what we may call the Catholic economic theory, if we under-
stand by theory, not a reasoned explanation of phenomena,
but a body of ideas leading to prescriptions for the guidance
of conduct. Life is here looked at from the point of view
of spiritual well-being ; the aim is to establish and maintain
amongst men a true kingdom of God.

The canonists are friendly to the notion of a community
cf goods from the side of sentiment (" Dulcissima rerum
possessio communis est "), though they regard the distinction
of meum and tuum as an institution necessitated by the fallen
state of man. In cases of need the public authority is justified
in re-establishing pro hac vice the primitive community. The
care of the poor is not a matter of free choice ; the relief
of their necessities is debitum legate. Avaritia is idolatry ;
cupiditas, even when it does not grasp at what is another's,
is the root of all evil, and ought to be not merely regulated
but eradicated. Agriculture and handiwork are viewed as
legitimate modes of earning food and clothing ; but trade is
regarded with disfavour, because it was held almost certainly
to lead to fraud : of agriculture it was said, " Deo non dis-
plicet ; " but of the merchant, " Deo placere non potest." The
seller was bound to fix the price of his wares, not according
to th« market rate, as determined by supply and demand,

28 POLITICAL ECONOMY.

but according to their real value (justum pretium). He must
not conceal the faults of his merchandise, nor take advan-
tage of the need or ignorance of the buyer to obtain from
him more than the fair price. Interest on monpy jfl f™*-
bidpifin ; the prohibition of usury is, indeed, as Roscher says,
the centre of the whole canonistic system of economy, as
well as the foundation of a great part of the ecclesiastical
jurisdiction. The question whether a transaction was or was
not usurious turning mainly on the intentions of the parties,
the innocence or blameworthiness of dealings in which money
was lent became rightfully a subject of determination for the
Church, either by her casuists or in her courts.1

The foregoing principles point towards a noble ideal, but by
their ascetic exaggeration they worked in some directions as
an impediment to industrial progress. Thus, whilst, with the
increase of production, a greater division of labour and a larger
employment of borrowed capital naturally followed, the laws
on usury tended to hinder this expansion. Hence they were
undermine^ by various exceptions, or evaded by fictitious
transactions. These laws were in fact dictated by, and adapted
to, early conditions — to a state of society in which money
loans were commonly sought either with a view to wasteful
pleasures or for the relief of such urgent distress as ought
rather to have been the object of Christian beneficence. But
they were quite unsuited to a period in which capital was
borrowed for the extension of enterprise and the employment
of labour. The absolute theological spirit in this, as in other
instances, could not admit the modification in rules of conduct
demanded by a new social situation ; and vulgar good sense
better understood what were the fundamental conditions of
industrial life.

When the intellectual activity previously repressed by the
more urgent claims of social preoccupations tended to revive
towards the close of the mediaeval period, the want of •

1 Reseller, Geschichte der N.O. in VeutscJdand, pp. 5, sqq.

THE MIDDLE AGES. 29

rational appreciation of the whole of human affairs was felt,
and was temporarily met by the adoption of the results of the
best Greek speculation. Hence we find in the writings of St.
Thomas Aquinas the political and economic doctrines of
Aristotle reproduced with a partial infusion of Christian
elements. His adhference to his master's point of view is
strikingly shown by the fact that he accepts (at least if he is
the author of the De Regimine Principum) l the Aristotelian
theory of slavery, though by the action of the forces of his
own time the last relics of that institution were being elimi-
nated from European society.

This great change-vthe enfranchisement of the working
clajses — was the most important practical outcome of the
Middle Ages) (The first step in this movement was the trans-
formation of slavery, properly so called, into serfdom^ (the
latter was, by its nature, a transitory coiiditipn^ The serf was
bound to the soil, had fixed domestic relations, and partici-
pated in the religious life of the society ; and the tendency of
all his circumstances, as well as of the opinions and sentiments
of the time, was in the direction of liberation. This issue
was, indeed, not so speedily reached by the rural as by the
urban workman. Already in the second phase serfdom is
abolished in the cities and towns, whilst agricultural serfdom
does not anywhere disappear before the third. The latter
revolution is attributed by Adam Smith to the operation of
selfish interests, that of the proprietor on the one hand, who
discovered the superior productiveness of cultivation by free
tenants, and that of the sovereign on the other, who, jealous
of the great lords, encouraged the encroachments of the
villeins on their authority. But that the Church deserves a
share of the merit seems beyond doubt — moral impulses, as
often happens, conspiring with political and economic motives.
The serfs were treated best on the ecclesiastical estates, and
the members of the priesthood, both by their doctrine and by

1 On this question see Jourdain, Philosophic de S. Thomas, vol. 1,
pp. 141-9, and 400.

30 POLITICAL ECONOMY.

their situation since the Northern conquests, were constituted
patrons and guardians of the oppressed or subject classes.
j Out of the liberation of the serfs rose the first lineaments
of the hierarchical constitution of modern industry in the
separation between the entrepreneurs and the workers. The
personal enfranchisement of the latter, stimulating activity
and developing initiative, led to accumulations, which wero
further promoted by the establishment of order and good
government by the civic corporations which grew out of the
.enfranchisement. Thus an active capitalist class came into
existence. It appeared first in commerce, the inhabitants of
the trading cities importing expensive luxuries from foreign
countries, or the improved manufactures of richer communities,
for which the great proprietors gladly exchanged the raw pro-
duce of their lands. In performing the office of carriers, too,
between different countries, these cities had an increasing field
for commercial enterprise. At a later period, as Adam Smith
has shown, commerce promoted the growth of manufactures,
which wereleitheE produced for foreign sale^r made from
foreign materials;'W imitated from the work of foreign artificers.
But the first important development of handicrafts in modern
Europe belongs to the fourteenth and fifteenth centuries, and
the rise of manufacturing entrepreneurs is not conspicuous
within the Middle Ages properly so called. C^griculture, of
course, lags behind ; though the feudal lords tend to transform
themselves into directors of agricultural enterprise, their habits
and prejudices retard such a movement, and the advance of
rural industry proceeds slowlv_T) It does, however, proceed,
partly by the stimulation arising from the desire to procure the
finer objects of manufacture imported from abroad or produced
by increased skill at home, partly by the expenditure on the
land of capital amassed in the prosecution of urban industries,
(oome of the trade corporations in the cities appear to have
been of great antiquity^ wut it was in the thirteenth century
that they rose to importance by being legally recognised and
regulated. } These corporations have been much too absolutely

THE MIDDLE AGES. 31

condemned by most of the economists, who insist on applying
to the Middle Ages the ideas of the eighteenth and nineteenth
centuries. They were, it is true, unfitted for modern times,
and it was necessary that they should disappear ; their exist-
ence indeed was quite unduly prolonged. But they were at
first in several respects highly beneficial. They were a valu-
able rallying-point for the new industrial forces, which were
strengthened by the rise of the esprit de corps which they
fostered. They improved technical skill by the precautions
which were taken for the solidity and finished execution of
the wares produced in each locality, and it was with a view
to the advancement of the industrial arts that St. Louis
undertook the better organisation of the trades of Paris.
The corporations also encouraged good moral habits through
the sort of spontaneous surveillance which they exercised,
and they tended to develop the social sentiment within the
limits of each profession, in times when a, larger public spirit
could scarcely yet be looked for.1

i Further information on the Economic Literature of the Middle Ages
will be found in H. Contzen, Geschichte der Volksioirthschaftlichen
Literatur in Mittelalter (2d ed. 1872), and V. Cusumano, Dell' Economia
Politica nel Medio-evo (1876). See also W. J. Ashley, Introduction to
English Economic History and Theory (1888), vol. i., chap. iii.

CHAPTER IV.
MODERN TIMES- FIRST AND SECOND PHASES.

THE close of the Middle Ages, as Comte has shown, must be
placed at the end, not of the fifteenth but of the thirteenth
century. The modern period, which then began, is filled by
a development exhibiting three successive phases, and issuing
in the state of things which characterises our own epoch.

I. During the fourteenth and fifteenth centuries the
Catholico-feudal system was breaking down by the mutual
conflicts of its own official members, whilst the constituent
elements of a new order were rising beneath it. On the
practical side the antagonists matched against each other were
the crown and the feudal chiefs ; and these rival powers sought
to strengthen themselves by forming alliances with the towns
and the industrial forces they represented. The movements
of this phase can scarcely be said to find an echo in any
contemporary economic literature.

II. In the second phase of the modern period, which opens
with the beginning of the sixteenth century, the spontaneous
collapse of the mediaeval structure is followed by a series of
systematic assaults which still further disorganise it. During
this phase the central temporal power, which has made a great
advance in stability and resources, lays hold of the rising
elements of manufactures and commerce, and seeks, whilst
satisfying the popular enthusiasm for their promotion, to use
them for political ends, and make them subserve its own
strength and splendour by furnishing the treasure necessary

MODERN TIMES. 33

for military success. With this practical effort, and the social
tendencies on which it rests, the Mercantile school of political
economy, which then obtains a spontaneous ascendency, is in
close relation. Whilst partially succeeding in the policy we
have indicated, the European Governments yet on the whole
necessarily fail, their origin and nature disqualifying them for
the task of guiding the industrial movement ; and the dis-
credit of the spiritual power, with which most of them are
confederate, further weakens and undermines them.

III. In the last phase, which coincides approximately with the
eighteenth century, the tendency to a completely new system,
both temporal and spiritual, becomes decisively pronounced,
first in the philosophy and general literature of the period,
and then in the great French explosion. The universal
critical doctrine, which had been announced by the Protes-
tantism of the previous phase, and systematised in England
towards the close of that phase, is propagated and popularised,
especially by French writers. The spirit of individualism
inherent in the doctrine was eminently adapted to the wants
of the time, and the general favour with which the dogmas of
the social contract and laisser faire were received indicated a
just sentiment of the conditions proper to the contemporary
situation of European societies. So long as a new coherent
system of thought and life could not be introduced, what was
to be desired was a large and active development of personal
energy under no further control of the old social powers than
would suffice to prevent anarchy. Governments were there-
fore rightly called on to abandon any effective direction of the
social movement, and, as far as possible, to restrict their
intervention to the maintenance of material order. This
policy was, from its nature, of temporary application only ;
but the negative school, according to its ordinary spirit,
erected what was merely a transitory and exceptional necessity
into a permanent* and normal law. The unanimous European
movement towards the liberation of effort, which sometimes
rose to the height of a public passion, had various sides,

o

34 POLITICAL ECONOMY.

corresponding to the different aspects of thought and life ;
and of the economic side the French physiocrats were the first
theoretic representatives on the large scale, though the office
they undertook was, both in its destructive and organic pro-
vinces, more thoroughly and effectively done by Adam Smith,
who ought to be regarded as continuing and completing theii
work.

It must be admitted that with the whole modern move-
ment serious moral evils were almost necessarily connected.
The general discipline which the Middle Ages had sought to
institute and had partially succeeded in establishing, though
on precarious bases, having broken down, the sentiment of
duty was weakened along with the spirit of ensemble which
is its natural ally, and individualism in doctrine tended to
encourage egoism in action. In the economic field this result
is specially conspicuous. National selfishness and private
cupidity increasingly dominate ; and the higher and lower
industrial classes tend to separation and even to mutual
hostility. The new elements — science and industry — which
were gradually acquiring ascendency bore indeed in their
bosom an ultimate discipline more efficacious and stable than
that which had been dissolved ; but the final synthesis was
long too remote, and too indeterminate in its nature, to be
seen through the dispersive and seemingly incoherent growth
of those elements. Now, however, that synthesis is becoming
appreciable ; and it is the effort towards it, and towards the
practical system to be founded on it, that gives its peculiar
character to the period in which we live. And to this spon-
taneous nisus of society corresponds, as we shall see, a new
form of economic doctrine, in which it tends to be absorbed
into general sociology and subordinated to morals.

It will be the object of the following pages to verify and
illustrate in detail the scheme here broadly indicated, and to
point out the manner in which the respective features of the
several successive modern phases find their counterpart and re-
flection in the historical development of economic speculation.

MODERN TIMES: FIRST PHASE. 35

FIRST MODERN PHASED...

The first phase was marked, on the one hand, by the
spontaneous decomposition of the mediaeval system, and,
on the other, by the rise of several important elements of
the new order. The spiritual power became less apt as well
as less able to fulfil its moral office, and the social movement
was more and more left to the irregular impulses of individual
energy, often enlisted in the service of ambition and cupidity.
Strong governments were formed, which served to maintain
material order amidst the growing intellectual and moral
disorder. The universal admission of the commons as an L
element in the political system showed the growing strength
of the industrial forces, as did also in another way the insur-
rections of the working classes. The decisive prevalence of
peaceful activity was indicated by the rise of the institution
of paid armies — at first temporary, afterwards permanent —
which prevented the interruption or distraction of labour by
devoting a determinate minority of the population to martial
operations and exercises. Manufactures became increasingly
important; and in this branch of industry the distinction
between the entrepreneur and the workers was first firmly
established, whilst fixed relations between these were made
possible by the restriction of military training and service
to a special profession. Navigation was facilitated by the
use of the mariner's compass. The art of printing showed
how the intellectual movement and the industrial develop-
ment were destined to be brought into relation with each
other and to work towards common ends. Public credit rose
in Florence, Venice, and Genoa long before Holland and
England attained any great financial importance. Just at
the close of the phase, the discovery of America and of the /7 7 «
new route to the East, whilst revolutionising the course of
trade, prepared the way fur the establishment of colonies,
which contributed powerfully to the growing preponderance
of industrial life, and pointed to its ultimate universality.

36 POLITICAL ECONOMY.

It is doubtless due to the equivocal nature of this stage,
standing between the mediaeval and the fully characterised
modern period, that on the theoretic side we find nothing
corresponding to such marvellous practical ferment and expan-
sion. The general political doctrine of Aquinas was retained,
with merely subordinate modifications. The only special
economic question which seems to have received particular
attention was that of the nature__and functions of money,
the importance of which began to be felt as payments in
service or in kind were discontinued, and regular systems of
taxation began to be introduced.

Roscher,1 and after him "Wolowski, have called attention
to Nicole Oresme, who was teacher of Charles V., King of
France, and died Bishop of Lisieux in 1382. Roscher pro-
nounces him a great economist,2 His Tractatus de Origins,
Natura, Jure, et Mutationibus Monetarum (reprinted by
Wolowski, 1864) contains a theory of money which is almost
entirely correct according to the views of the nineteenth century,
and is stated with such brevity, clearness, and simplicity of
language as show the work to be from the hand of a master.

SECOND MODERN PHASE: MERCANTILE SYSTEM.

Throughout the first modern phase the rise of the new
social forces had been essentially spontaneous ; in the second
they became the object of systematic encouragement on the
part of Governments, which, now that the financial methods
of the Middle Ages no longer sufficed, could not further their
military and political ends by any other means than increased
taxation, implying augmented wealth of the community.
Industry thus became a permanent interest of European
Governments, and even tended to become the principal object
of their policy. In natural harmony with this state of facts,

1 Comptes rendus de V Academic des Sciencet morales et politique*, Ixii

135, *qq-

2 Geschichte der N.O. in Deutschland, p. 25.

SECOND MODERN PHASE. 37

the mercantile system arose and grew, attaining its highest
development about the middle of the seventeenth century.

[ercantile doctrine, stated in its most extreme form,
makes wealth and money identical, and regards it therefore as
the great object of a community so to conduct its dealings
with other nations as to attract to itself the largest possible
share of the precious metals. Each country must seek to
export the utmost possible quantity of its own manufactures,
and to import as little as possible of those of other countries,
receiving the difference of the two values in gold and silver.
This difference is called the balance of trade, and the balance
is favourable when more money is received than is paid.
Governments must resort to all available expedients — prohibi-
tion of, or high duties on, the importation of foreign wares,
bounties on the export of home manufactures, restrictions on
the export of the precious metals — for the purpose of securing
such a balance.

But this statement of the doctrine, though current in the
text-books, does not represent correctly the views of all who
must be classed as belonging to the Mercantile school. Many
of the members of that school were much too clear-sighted to
entertain the belief, which the modern student feels difficulty
in supposing any class of thinkers to have professed, that
wealth consists exclusively of gold and silver. The mercan-
tilists may be best described, as Roscher l has remarked, not
by any definite economic theorem which they held in common,
but by a set of theoretic tendencies, commonly found in com-
bination, though severally prevailing in different degrees in
different minds. These tendencies may be enumerated as
follows : — (i) Towards over-estimating the importance of
possessing a large amount of the precious metals ; (2) towards
an undue exaltation (a) of foreign trade over domestic, and (b)
of the industry which works up materials over that which
provides them ; (3) towards attaching too high a value to a
dense population as an element of national strength; and (4)
1 Geschichte der N.O. in Deutsc/dand, p. 228, sqq.

38 POLITICAL ECONOMY.

towards invoking the action of the state in furthering arti
ficially the attainment of the several ends thus proposed as
desirable.

If we consider the contemporary position of affairs in Western
Europe, we shall have no difficulty in understanding how these
tendencies would inevitably arise. The discoveries in the
New World had led to a large development of the European
currencies. The old feudal economy, founded principally on
dealings in kind, had given way before the new " money
ecojooniy," and the dimensions of the latter were everywhere
expanding. Circulation was becoming more rapid, distant
communications more frequent, city life and movable property
more important. The_mercantilists were impressed by 'the
fact that money is wealth sujt genens^thai it is at all times in
universal demand, and that it puts into the hands of its pos-
sessor the power of acquiring all other commodities. The
period, again, was marked by the formation of great states, with
powerful Governments at their head. These Governments
required men and money for the maintenance of permanent
armies, which, especially for the religious and Italian wars,
were kept up on a great scale. Court expenses, too, were
more lavish than ever before, and a larger number of civil
officials was employed. The royal domains and dues were
insufficient to meet these requirements, and taxation grew with
the demands of the monarchies. Statesmen saw that for their
own political ends industry must flourish. Biit manufactures
make possible a denser population and a higher total value of
exports than agriculture ; they open a less limited and more
promptly extensible field to enterprise. Hence they became
the object of special Governmental favour and patronage,
whilst agriculture fell comparatively into the background.
The growth of manufactures reacted on commerce, to which a
new and mighty arena had been opened by the establishment
of colonies. These were viewed simply as estates to be worked
for the advantage of the mother countries, and the aim of
statesmen was to make the colonial trade a new source of

SECOND MODERN PHASE. 39

public revenue. Each nation, as a whole, working for its own

power, and the greater ones for predominance, they entered
into a competitive struggle in the economic no less than in the
political field, success in the former being indeed, by the rulers,
regarded as instrumental to pre-eminence in the latter. A
national economic interest came to exist, of whioh the Govern-
ment made itself the representative head. States became a
sort of artificial hothouses for the rearing of urban industries.
Production was subjected to systematic regulation with the
object of securing the goodness and cheapness of the exported
articles, and so maintaining the place of the nation in foreign
markets. The industrial control was exercised, in part directly
by the state, but largely also through privileged corporations
and trading companies. High duties on imports were resorted
to, at first perhaps mainly*lor revenue, but afterwards in the
interest of national production. Commercial treaties were a
principal object of diplomacy, the end in view being to exclude
the competition of other nations in foreign markets, whilst in
the home market as little room as possible was given for the
introduction of anything but raw materials from abroad. The
colonies were prohibited from trading with other European
nations than the parent country, to which they supplied either
the precious metals or raw produce purchased with home ;
manufactures. It is evident that what is known as the mer-'
cantile doctrine was essentially the theoretic counterpart of the '
practical activities of the time, and that nations and Govern-
ments were led to it, not by any form of scientific thought,
but by the force of outward circumstance, and the observation
of facts which lay on the surface.

And yet, if we regard the question from the highest point
of view of philosophic history, we must pronounce the uni*
versal enthusiasm of this second modern phase for manufac-
tures and commerce to have been essentially just, as leading
the nations into the main avenues of general social develop-
ment. If the thought of the period, instead of being impelled
by contemporary circumstances, could have been guided by

40 POLITICAL ECONOMY.

sociological prevision, it must have entered with zeal upon th&
same path which it empirically selected. The organisation of
agricultural industry could not at that period make any marked
progress, for the direction of its operations was still in the
hands of the feudal class, which could not in general resJljr
learn the habits of industrial life, or place itself in sufficient
harmony with the workers on its domains. /Tfre_ industry of
the towns had to precede that of the country, and the latter
had to be developed mainly through the indirect action of the
formefj And it is plain that it was in the life of the manu-
facturing proletariat, whose labours are necessarily the most
continuous and the most social, that a systematic discipline
could at a later period be first applied, to be afterwards ex-
tended to the rural populations.

That the efforts of Governments for the futherance of
manufactures and commerce were really effective towards that
end is admitted by Adam Smith, and cannot reasonably be
doubted, though free trade doctrinaires have often denied it.
Technical skill must have been promoted by their encourage-
ments ; whilst new forms of national production were fostered
by attracting workmen from other countries, and by lightening
the burden of taxation on struggling industries. /Qommunica-
tion and transport by land and sea were more rapidly improved
with a view to facilitate traffic! and, not the least important
effect, the social dignity "df—line industrial professions was
enhanced relatively to that of the classes before exclusively
dominant.

It has often been asked to whom the foundation of the
mercantile system, in the region whether of thought or of
practice, is to be attributed. But the question admits of no
absolute answer. That mode of conceiving economic facts
arises spontaneously in unscientific minds, and ideas suggested
by it are to be found in the Greek and Latin writers. The
policy which it dictates was, as we have shown, inspired by
the situation of the European nations at the opening of the
modern period. Such a policy had been already in some

SECOND MODERN PHASE. 41

degree practised in the fourteenth and fifteenth centuries, thus
preceding any formal exposition or defence of its speculative
basis. fk&hQ commencement of the sixteenth century it began
to exercise a widely extended influence^ Charles V.

it, and his example contributed much to its predominance.
tjjenry VIII. and Elizabeth conformed their measures to it.
The leading states soon entered on a universal competition, in
which each power brought into play all its political and
financial resources for the purpose of securing to itself manu-
facturing and commercial preponderance. Through almost the
whole of the seventeenth century the prize, so far as commerce
was concerned, remained in the possession of Holland, Italy
having lost her former ascendency by the opening of the new
maritime routes, and by her political misfortunes, and Spain
and Germany being depressed by protracted wars and internal
dissensions. The admiring envy of Holland felt by English
politicians and economists appears in such writers as Raleigh,
Mun, Child, and Temple ; l and how strongly the same
spectacle acted on French policy is shown by a well-known
letter of Colbert to M. de Pomponne,2 ambassador to the
Dutch States. Cromwell^ _J>y the Navigation Act, which
destroyed the carrying trade of Holland and founded the
English empire of the sea, and Colbert, by his whole economic
policy, domestic and international, were the chief practical
representatives of the mercantile ^system. From the latter
great statesman the Italian publicist Mengotti gave to that
system the name of Colbertismo ; but it would be an error to
consider the French minister as having absolutely accepted
its dogmas. He regarded his measures as temporary only,
and spoke of protective duties as crutches by the help of which
manufacturers might learn to walk and then throw them away.
The policy of exclusions had been previously pursued by Sully,
partly with a view to the accumulation of a royal treasure, but

1 Roscher, GescMchte der N.O. in Deulsckland, p. 227.
* Clement, Histoirede la vie et de V administration de Colbert (1846),
* '34.

42 POLITICAL ECONOMY.

chiefly from his special enthusiasm for agriculture, and his
dislike of the introduction of foreign luxuries as detrimental
to the national character. (Colbert's tariff of 1664 not merely
simplified but considerably reduced the existing dutiej|; the
tariff of 1667 indeed increased them, but that was really a
political measure directed against the Dutch. It seems certain
that France owed in a large measure to his policy the vast
development of trade and manufactures which so much
impressed the imagination of contemporary Europe, and of
which we hear so much from English writers of the time of
Petty. But this policy had also undeniably its dark side.
Industry was forced by such systematic regulation to follow
invariable courses, instead of adapting itself to changing
tastes and popular demand. Nor was it free to simplify the
processes of production, or to introduce increased division of
labour and improved appliances. Spontaneity, initiation, and
invention were repressed or discouraged, and thus ulterior
sacrificed in a great measure to immediate results. The more
enlightened statesmen, and Colbert in particular, endeavoured,
it is true, to minimise these disadvantages by procuring, often
at great expense, and communicating to the trades through
inspectors nominated by the Government, information respect-
ing improved processes employed elsewhere in the several
arts ; but this, though in some degree a real, was certainly on
the whole, and in the long run, an insufficient compensation,

We must not expect from the writers of this stage any
exposition of political economy as a whole ; the publications
which appeared were for the most part evoked by special
exigencies, and related to particular questions, usually of a
practical kind, which arose out of the great movements cf the
time. They were in fact of the nature of counsels to the
Governments of states, pointing out how best they might
develop the productive powers at their disposal and increase
the resources of their respective countries. They are con-
ceived (as List claims for them) strictly in the spirit of
national economy, and cosmopolitanism is essentially foreign

SECOND MODERN PHASE. 43

to them. On these monographs the mercantile theory sometimes
had little influence, the problems discussed not involving its tenets.
But it must in most cases be taken to be the scheme of funda-
mental doctrine (so far as it was ever entitled to such a descrip-
tion) which in the last resort underlies the writer's conclusions.
iThejjgejpf prices following on the discovery of the Ameri-
can min^s__wasoneof the subjects which first attracted the
attention of theorists. This rise broughtTabout a great and
gradually increasing disturbance of existing economic relations,
and so produced much perplexity and anxiety, which were all
the more felt because the cause of the change was not under-
stood. To this was added the loss and inconvenience arising
from the debasement of the currency often resorted to by
sovereigns as well as by republican states. Italy suffered most
from this latter abuse, which was multiplied by her political
divisions. It was this evil which called forth the work of Count
Gasparo Scaruffi (Discorso sopra le monete e della vera pro-
porzione fra I' oro e I' argento, 1582). In this he put forward
the bold idea of a universal money, everywhere identical in size,
shape, composition, and designation. The project was, of course,
premature, and was not adopted even by the Italian princes to
whom the author specially appealed; but the reform is one
which, doubtless, the future will see realized. Gian Donato
Turbolo, master of the Neapolitan mint, in his Discorsi e
Relazioni, 1629, protested against any tampering with the
currency. Another treatise relating to the subject of money was
that of the Florentine Bernardo Davanzati, otherwise known as
the able translator of Tacitus, Lezioni delle Monete, 1588. It is
a slight and somewhat superficial production, only remarkable as
written with conciseness and elegance of style.1 , /

A French writer who dealt with the question of money,
but from a different point of view, was Jean Bodin. In his
Repo^se aux paradoxes de M. Malestroit touchant V encherisse-
ment de toutes les choses et des monnaies, 1568, and in his

1 A more valuable work is that of Romeo Bocchi (written in 1611 and
published in 1621), Della guista universale misura e suo typo: vol. i.,
Anima della Moneta; vol. ii., Corpo della Moneta, of which a full
account has been given by U. Gobbi in his Economics Politico, negli
Scrittori Italiani del Secolo xvi-xvii (1889).

44 POLITICAL ECONOMY.

Discours sur le rehaussement et la diminution des monnaies,
1578, he showed a more rational appreciation than many cf his
contemporaries of the causes of the revolution in prices, and
the relation of the variations in money to the market values
of wares in general as well as to the wages of labour. He saw
that the amount of money in circulation did not constitute
the wealth of the community, and that the prohibition of the
export of the precious metals was useless, because rendered
inoperative by tne necessities of trade. Bodin is no incon-
siderable figure in the literary history of the epoch, and did
not confine his attention to economic problems ; in his Six
livres de la Repullique, about 1576, he studies the general
conditions of the prosperity and stability of states. In har-
mony with the conditions of his age, he approves of absolute
Governments as the most competent to ensure the security
and wellbeing of their subjects. He enters into an elaborate
defence of individual property against Plato and More, rather
perhaps because the scheme of his work required the treatment
of that theme than because it was practically urgent in his
day, when the excesses of the Anabaptists had produced a
strong feeling against communistic doctrines. He is under
the general influence of the mercantilist views, and approves
of energetic Governmental interference in industrial matters,
of high taxes on foreign manufactures and low duties on raw
materials and articles of food, and attaches great import-an en
to a dense population. But he is not a blind follower of the
system; he wishes for unlimited freedom of trade in many
cases ; and he is in advance of his more eminent contemporary
Montaigne l in perceiving that the gain of one nation is not
necessarily the loss of another. To the public finances, which
he calls the sinews of the state, he devotes much attention,
and insists on the duties of the Government in respect to
the right adjustment of taxation. In general he deserves
the praise of steadily keeping in view the higher aims and

1 " II ne se faict aucuu profit qu'au dommage d'autruy." £ssais, liv.
J, chap. 21.

SECOND MODERN PHASE. 45

interests of society in connection with the regulation and
development of its material life.1

Correct views as to the cause of the general rise of prices are
also put forward by the English writer, W. S. (William Stafford),
in his Brief e Conceipte of English Policy, published in 1581,
and dedicated to Queen Elizabeth. It is in the form of a
dialogue, and is written with liveliness and spirit. The author
seems to have been acquainted with the writings of Bodin. He
has just ideas as to the nature of money, and fully understands
the evils arising from a debased coinage. He describes in detail
the way in which the several interests in the country had been
affected by such debasement in previous reigns, as well as by the
change in the value of the precious metals. The great popular
grievance of his day, the conversion of arable land into pasture,
he attributes chiefly to the restrictions on the export of corn,
which he desires to see abolished. But in regard to manufactures
he is at the same point of view with the later mercantilists, and
proposes the exclusion of all foreign wares which might as well
be provided at home, and the prohibition of the export of raw
materials intended to be worked up abroad.

Out of the question of money, too, arose the first remarkable
German production on political economy which had an original
national character and addressed the public in the native
tongue. The Ernestine Saxon line was inclined (1530) to intro-
duce a debasement of the currency. A pamphlet, Gemeine
Stymmen von der Muntze, was published in opposition to this
proceeding, under the auspices of the Albertine branch, whose
policy was sounder in the economic sphere. A reply appeared
justifying the Ernestine project. This was followed by a
rejoinder from the Albertine side. The Ernestine pamphlet
is described by Roscher as ill-written, obscure, inflated, and,
as might be expected from the thesis it maintained, sophistical.
But it is interesting as containing a statement of the fun-
damental principles of the mercantile system more than

1 A writer whose literary activity was of a similar character to
Bodin's, and who seems to have been much influenced by him, was the
Italian Giovanni Botero (1540-1617). His treatise Delle cause delta
grandezza delle citta (1588; Eng. Trans, by Robert Peterson, 1606) was
introductory to his chief work Delia ragion di Stato, libri X (1589), in
which he combated the principles of Machiavelli.

46 POLITICAL ECONOMY.

/ one hundred years before the publication of Mun's book, and
forty-six before that of Bodin's Six livres de la Republique.
The Albertine tracts, according to Roscher, exhibit such sound
views of the conditions and evidences of national wealth, of
the nature of money and trade, and of the rights and duties
of Governments in relation to economic action, that he regards
the unknown author as entitled to a place beside Raleigh and
the other English " colonial-theorists " of the end of the six-
teenth and beginning of the seventeenth century.

In connection with the same subject of money we meet the
great name of Copernicus. His treatise De monetce cudendce
ratione, 1526 (first printed in 1816), was written by order of
King Sigismund L, and is an exposition of the principles on
which it was proposed to reform the currency of the Prussian
provinces of Poland. It advocates unity of the monetary
system throughout the entire state, with strict integrity in the
quality of the coin, and the charge of a seigniorage sufficient
to cover the expenses of mintage.

Antonio Serra is regarded by some as the creator of modern
political economy. He was a native of Cosenza in Calabria.
His Breve Trattato delle cause che possono fare abbondare li
regni d'oro e d'argento dove non sono miniere, 1613, was
written during his imprisonment, which is believed to have
been due to his having taken part in the conspiracy of
Campanella for the liberation of Naples from the Spanish
yoke and the establishment of a republican government. Thia
work, long overlooked, was brought into notice in the follow-
ing century by Galiani and others. Its title alone would
sufficiently indicate that the author had adopted the principles
of the mercantile system, and in fact in this treatise the
essential doctrines of that system are expounded in a tolerably
formal and consecutive manner. He strongly insistsjon^ the
superiority of manufactures over agriculture as^ a_s.9u£^®J3ll
national wealth, and uses in support of this view the pros-
perity of Genoa, Florence, and Venice, as contrasted with the
depressed condition of Naples. With larger insight thaD

SECOND MODERN PHASE. 47

many of the mercantilists exhibit, he insists on the import-
ance, towards the acquisition of wealth, not alone of favourable
external conditions, but of energetic character and industrious
habits in a population, as well as of a stable government and
a good administration of the laws.

The first systematic treatise on our science which proceeded
from a French author was the Traite de I 'Jtlconomie Politique^
published by Montchre"tien de "Watteville (or Vasteville) * in
1615. The use of the title, says Roscher, now for the first
time given to the science, was in itself an important service,
since even Bacon understood by " Economia " only the theory
of domestic management. The general tendencies and aims
of the period are seen in the fact that this treatise, notwith-
standing the comprehensive name it bears, does not deal with
agriculture at all, but only with the mechanical arts, navigation,
commerce, and public finance. The author is filled with the
then dominant enthusiasm for foreign trade and colonies.
He advocates the control by princes of the industry of their
subjects, and condemns the too great freedom, which, in his
opinion to their own detriment, the Governments of Spain,
Portugal, and Holland had given to trade. His book may
be regarded as a formal exposition of the principles of the
mercantile system for the use of Frenchmen.

A similar office was performed in England by T^omas^Mun^,
In his two works, A Discourse of Trade from England unto
the East Indies, 2nd ed., 1621, and especially in England's
Treasure by Foreign Trade, 1664 (posthumous), we have for
the first time a clear and systematic statement of the theory
of the balance of trade, as well as of the means by which,
according to the author's view, a favourable balance could be
secured for England. The great object of the economic policy
of a state, according to him, should be so to manage its export

1 Montehre'tien, having fomented the rebellion in Normandy in 1621,
was slain, with a few followers, by Claude Turgot, lord of Les Tourailles,
who belonged to the elder branch of the noble house from which the
great Turgot was descended.

48 POLITICAL ECONOMY.

of manufactures, its direct and carrying trade, and its custom!
duties, as to attract to itself money from abroad. He was,
however, opposed to the prohibition of the export of the
precious metals in exchange for foreign wares, but on the
ground, fully according with his general principles, that those

! wares might afterwards be re-exported and might then bring
back more treasure than had been originally expended in their
[ purchase ; the first export of money might be, as he said, the
seed-time, of which the ultimate receipt of a larger amount
would be the harvest.1 He saw, too, that it is inexpedient
to have too much money circulating in a country, as this
enhances the prices of commodities, and so makes them lew
saleable to foreigners, but he is favourable to the formation
and maintenance of a state treasure.2

One of the most remarkable of the moderate mercantilists
was S^Jc^ahjChildj(jBrie/ Observations concerning Trade and
the Interest of Money y 1668, and A New Discourse of Trade,
1668 and 1690). He was one of those who held up Holland
as a model for the imitation of his fellow-countrymen. He
is strongly impressed with the importance for national wealth
and wellbeing of a low rate of interest, which he says is to
commerce and agriculture what the soul is to the body, and
which he held to be the " causa causans of all the other causes
of the riches of the Dutch people." Instead of regarding
such low rate as dependent on determinate conditions, which
should be allowed to evolve themselves spontaneously, he
thinks it should be created and maintained by public authority.
Child, whilst adhering to the doctrine of the balance of
trade, observes that a people cannot always sell to foreigners

1 On Mun's doctrines, see Smith's Wealth of Nations, Bk. iv. chap. L
* Writers of less importance who followed the same direction were
Sir Thomas Culpeper (A Tract against the High Kate of Usury, 1623,
and Useful Remark on High Interest, 1641), Sir Dudley Digges (Defence
of Trade, 1615), G. Malynes (Consuetude vel Lex Mercatoria, 1622),
E. Misselden (Circle of Commerce, 1623), Samuel Fortrey (England't
Interest and Improvement, 1663 and 1673), and John Pollexfen (England
and India inconsistent in their Manufactures, 1697).

SECOND MODERN PHASE. 49

without ever buying from them, and denies that the export
of the precious metals is necessarily detrimental. He has the
ordinary mercantilist partiality for a numerous population.
He advocates the reservation by the mother country of the
eole right of trade with her colonies, and, under certain
limitations, the formation of privileged trading companies.
As to the Navigation Act, he takes up a position not unlike
that afterwards occupied by Adam Smith, regarding that
measure much more favourably from the political than from
the economic point of view. It will be seen that he is some-
what eclectic in his opinions ; but he cannot properly be re-
garded, though some have attributed to him that character, as
a precursor of the free-trade school of the eighteenth century.

Two other eclectics may be here mentioned, in whom just
views are mingled with mercantilist prejudices — Sir William
Temple and Charles Davenant. The former in his Observations
upon the United Provinces of the Netherlands, 1672, and his
Essay on the Trade of Ireland, 1673, ^as many excellent
remarks on fundamental economic principles, as on the func-
tions of labour and of saving in the production of national
wealth ; but he is infected with the errors of the theory of the
balance of trade. He follows the lead of Ealeigh and Child
in urging his fellow-countrymen to imitate the example of the
Dutch in their economic policy — advice which in his case was
founded on his observations during a lengthened residence in
Holland as ambassador to the States. Davenant in his Essay
on the East-India Trade, 1696-97, Essay on the Probable
Ways of making the People Gainers in the Balance of Trade,
1699, &c., also takes up an eclectic position, combining some
correct views on wealth and money with mercantilist notions
on trade, and recommending Governmental restrictions on
colonial commerce as strongly as he advocates freedom of
exchange at home.

Whilst the mercantile system represented thejagvalgnjLfQHn
of economic thought in the seventeenth century, and was alone
dominant in the region of practical statesmanship, there wa

D

40 POLITICAL ECONOMY.

gro\v Ing upj side by side with it, a body of opinion, different
and indeed hostile in character, which was destined ultimately
lo drive it from the field. The new ideas were first developed
in England, though it was in France that in the following
century they took hold of the public mind, and became a
power in politics. That they should first show themselves
here, and afterwards be extended, applied, and propagated
throughout Europe by French writers, belongs to the order
of things according to which the general negative doctrine in
morals and politics, undoubtedly of English origin, found its
chief home in France, and was thence diffused in widening
circles through the civilised world. In England this move-
ment of economic thought took the shape mainly of individual '
criticism of the prevalent doctrines, founded on a truer analysis
of facts and conceptions ; in France it was penetrated with a
powerful social sentiment, furnished the creed of a party, and
inspired a protest against existing institutions and an urgent
demand for practical reform.

Regarded from the theoretic side, the characteristicJaaturei
of the new direction were the following. The view of at least
the extreme mercantilists that national wealth depends on the
accumulation of the precious metals is proved to be false, and
the gifts of nature and the labour of man are shown to be its
real sources. The exaggerated estimate of the importance of
foreign commerce is reduced, and attention is once more turned
to agriculture and the conditions of its successful prosecution.
On the side of practical policy, a so-called favourable balance
of trade is seen not to be the true object of a nation's or a
statesman's efforts, but the procuring for the whole population
in the fullest measure the enjoyment of the necessaries and
conveniences of life. And — what more than anything else
contrasts the new system with the old — the elaborate appa-
ratus of prohibitions, protective duties, bounties, monopolies,
and privileged corporations, which the European Governments
had created in the supposed interests of manufactures and
trade, is denounced or deprecated as more an impediment than

SECOND MODERN PHASE. 51

a furtherance, and the freedom of industry is insisted on aa
the one thing needful. This circle of ideas, of course, emerges
only gradually, and its earliest representatives in economic
literature in general apprehend it imperfectly and advocate it
with reserve ; but it rises steadily in importance, being more
and more favoured by the highest minds, and finding an in-
creasing body of supporters amongst the intelligent public.

Some occasional traits of an economic scheme in harmony
with these new tendencies are to be found in the De Cive
and Leviathan of Hobbes. But the efficacy of that great
thinker lay rather in the general philosophic field ; and by sys-
tematising, for the first time, the whole negative doctrine, he
gave a powerful impulse towards the demolition of the exist-
ing social order, which was destined, as we shall see, to have
momentous consequences in the economic no less than in the
strictly political department of things.

A writer of no such extended range, but of much sagacity
and good sense, was Sir William Petty, author of a number
of pieces containing germs of a sound economic doctrine. A
leading thought in his writings is that "labour is the father
and active principle of wealth, lands are the mother." He
divides a population into two classes, the productive and the
unproductive, according as they are or are not occupied in
producing useful material things. The value of any com-
modity depends, he says, anticipating Ricardo, on the amount
of labour necessary for its production. He is desirous of
obtaining a universal measure of value, and chooses as his
unit the average food of the cheapest kind required for a man's
daily sustenance. He understands the nature of the rent of
land as the excess of the price of its produce over the cost of
production. He disapproves of the attempt to fix by autho-
rity a maximum rate of interest, and is generally opposed to
Governmental interference with the course of industry. He

(sees that a country requires for its exchanges a definite
quantity of money and may have too much of it, and con-
demns the prohibition of its exportation. He he Ids that one

52 POLITICAL ECONOMY.

only of the precious metals must be the foundation of th«
currency, the other circulating as an ordinary article of mer-
chandise. Petty's name is specially associated with the pro-
gress of statistics, with which he was much occupied, and
which he called by the name of political arithmetic. Relying
on the results of such inquiries, he set himself strongly against
the opinion which was maintained by the author of Britannia
Languens (1680), Fortrey, Roger Coke, and other writers, that
the prosperity of England was on the decline.

The most thorough-going and emphatic assertion of the free-
trade doctrine against the system of prohibitions, which had
gained strength by the Revolution, was contained in Sir
Dudley North's Discourses upon Trade, 1691. He^shqws
that wealth may exist independently of gold or silver, its
source being human industry, applied either to the cultivation
of the soil or to manufactures. The precious metals, however,
are one element of national wealth, and perform highly im-
portant offices. Money may exist in excess, as well as in
defect, in a country^; and""^^ quaiitiby"ol it required for the
purposes of trade will vary with circumstances ; its ebb and
flow will regulate themselves spontaneously. It is a mistake
to suppose that stagnation of trade arises from want of money ;
it must arise either from a glut of the home market, or from
a disturbance of foreign commerce, or from diminished con-
sumption caused by poverty. The export of money in the
course of traffic, instead of diminishing, increases the national
wealth, trade being only an exchange of superfluities. Nations
are economically related to the world just in the same way as
cities to the state or as families to the city. North emphasises
more than his predecessors the value of the home trade. With
respect to the interest of capital, he maintains that it depends,
like the price of any commodity, on the proportion of demand
and supply, and that a low rate is a result of the relative
increase of capital, and cannot be brought about by arbitrary
regulations, as had been proposed by Child and others. In
arguing the question of free trade, he urges that individual*

SECOND MODERN PHASE. 53

often take their private interest as the measure of good and
evil, and would for its sake debar others from their equal right
of buying and selling, but that every advantage given to one
interest or branch of trade over another is injurious to the
public. No trade is unprofitable to the public ; if it were, it
would be given up; wnen trades thrive, so does the public,
of which they form a part. Pricesmust determine themselves,
and cannot be fixed by law ; and all forcible interference with
them does harm instead of good. No people can become rich
by state regulations, — only by peace, industry, freedom, and
unimpeded economic activity. It will be seen how closely
North's view of things approaches to that embodied some
eighty years later in Adam Smith's great work.1

Locke is represented by Roscher as, along with Petty and
Nomi, making up the "triumvirate" of eminent British
economists of this period who laid the foundations of a new
and more rational doctrine than that of the mercantilists.
But this view of his claims seems capable of being accepted
only with considerable deductions. His specially economic
writings are Considerations of the loicering of Interest and
raising the value of Money, 1691, and Further Considerations,
1695. Though Leibnitz declared with respect to these treatises
that nothing more solid or intelligent could be said on their
subject, it is difficult absolutely to adopt that verdict. Locke's
spirit of sober observation and patient analysis led him indeed
to some just conclusions ; and he is entitled to the credit of
having energetically resisted the debasement of the currency,
which was then recommended by some who were held to be
eminent practical authorities. But he falls into errors which
show that he had not by any means completely emancipated
himself from the ideas of the mercantile system. He attaches
far too much importance to money as such. He says expressly
that riches consist in a plenty of gold and silver, that is, as he

1 Yet M. Eugene Daire asserts ((Euvresde Tnryot, i. 322) that " Hume
et Tucker sont les deux premiers ecrivains qui se soient Sieves, en Angle.
terre, au-dessus des theories du system? mercantile."

54 POLITICAL ECONOMY.

explains, in having more in proportion of those metals than
the rest of the world or than our neighbours. " In a country
not furnished with mines, there are but two ways of growing
rich, either conquest or commerce." Hence he accepts the
doctrine of the balance of trade. He shows that the rate of
interest can no more be fixed by law than the rent of houses
or the hire of ships, and opposes Child's demand for legisla-
tive interference with it. But he erroneously attributed the
fall of the rate which had taken place generally in Europe to
the increase of the quantity of gold and silver by the discovery
of the American mines. He sets too absolute a value on a
numerous population, in this point agreeing with Petty. On
wages he observes that the rate must be such as to cover the
indispensable wants of the labourer ; when the price of sub-
sistence rises, wages must rise in a like ratio, or the working
population must come on the poor rates. The fall of the rent
of land he regards as a sure sign of the decline of national
wealth. " Taxes, however contrived, and out of whose hands
soever immediately taken, do, in a country where their great
fund is in land, for the most part terminate upon land." In
this last proposition we see a foreshadowing of the impfrt
unique of the physiocrats. Whatever may have been Locke's
direct economic services, his principal importance, like that of
Hobbes, lies in his general philosophic and political principles,
which powerfully affected French and indeed European thought,
exciting a spirit of opposition to arbitrary power, and laying the
foundation of the doctrine developed in the Gontrat Social.1

1 Minor English writers who followed the new economic direction
were Lewis Roberts, Treasure of TrafficJc, 1641 ; Rice Vaughan, Di«courst
of Coin and Coinage, 1675 ; Nicholas Barbon, Discourse concerning Crin*
ing the new money lighter, 1696, in which some of Locke's errors were
pointed out ; and the author of an anonymous book entitled Considera-
tions on the East India Trade, 1701. Practical questions much debated
at this period were those connected with banking, on which a lengthened
controversy took place, S. Lamb, W. Potter, F. Cradocke, M. Lewis,
M. Godfrey, R. Murray, H. Chamberlen, and W. Paterson, founder of
the Bank of England (1694), producing many pamphlets on the subject j
and the management of the poor, which was treated by Locke, Sif
Matthew Hale, R. Haines, T. Firmin, and others.

CHAPTER V.

THIRD MODERN PHASE: SYSTEM OF NATURAL
LIBERTY.

THE di4jiges-jntroduced during the third_phase_Jn the in-
ternal organisation of the industrial world were (i) the more I
complete separation nf. ..hanking frorp general commernftr and j
the wider extension of its operations, especially through the •
system of public credit; and (2) the great development of the -
use of machinery in production. The latter did not become 7
very prominent during the first half of the eighteenth century.
Whilst tending to promote the dignity of the working classes by
relieving them from degrading and exhausting forms of labour,
it widened the gulf between them and the capitalist employers.
It thus became plain that for the definitive constitution of in-
dustry a moral reform was the necessary preliminary condition.
With respect to the political relations of industry, a remark-
able inversion now showed itself. The systematic encourage-
ments which the European Governments had extended to it
in the preceding phase had been prompted by their desire to
use it as an instrument for achieving the military superiority
which was the great end of their policy. Now, on the con-
trary, the military spirit subordinated itself to the industrial,
and the armies and the diplomacy of governments were placed
at the service of commerce. The wars which filled a large
part of the eighteenth century were essentially Commercial
wars, arising out of the effort to sustain or extend the colonial
establishments founded in the previous phase, or to deprive
rival nations of the industrial advantages connected with the

56 POLITICAL ECONOMY.

possession of such establishments. This change of attitude,
notwithstanding its deplorable tendency to foster international
enmities and jealousies, marked a real and important progress
by pointing to industrial activity as the one permanent
practical destination of modern societies.

But, whilst by this sort of action furthering the ascendency
of the new forces, the ruling powers, both in England and
France, betrayed the alarm they felt at the subversive ten-
dencies which appeared inherent in the modern movement by
taking up in their domestic policy an attitude of resistance.
Reaction became triumphant in France during the latter half
of the reign of Louis XIV. under the disastrous influence of
Madame de Maintenon. In England, after the transaction of
1688, by which the Government was consolidated on the
double basis of aristocratic power and official orthodoxy, the
state policy became not so much retrograde as stationary,
industrial conquest being put forward to satisfy the middle
class and wean it from the pursuit of a social renovation,
In both countries there was for some time a noticeable check
in the intellectual development, and Roscher and others have
observed that, in economic studies particularly, the first three
decades of the eighteenth century were a period of general
stagnation, eclecticism for the most part taking the place of
originality. The movement was, however, soon to be resumed,
but with an altered and more formidable character. The
negative doctrine, which had risen and taken a definite form
in England, was diffused and popularised in France, where it
became evident, even before the decisive explosion, that the
only possible issue lay in a radical social transformation.
The partial schools of Voltaire and Rousseau in different ways
led up to a violent crisis, whilst taking little thought of the
conditions of a system which could replace the old ; but the
more complete and organic school, of which Diderot k the
best representative, looked through freedom to a thorough
reorganisation. Its constructive aim is shown by the design
of the Encyclopedic, — a project, however, which could have

SYSTEM OF NATURAL LIBERTY. 57

only a temporary success, because no real synthesis was forth-
coming, and this joint production of minds often divergent
could possess no more than an external unity. It was with
this great school that the physiocrats were specially connected ;
and, in common with its other members, whilst pushing
towards an entire change of the existing system, they yet
would gladly have avoided political demolition through the
exercise of a royal dictatorship, or contemplated it only as the
necessary condition of a new and better order of things. But,
though marked off by such tendencies from the purely revo-
lutionary sects, their method and fundamental ideas were
negative, resting, as they did, essentially on the basis of the
jits natures. "We shall follow in detail these French develop-
ments in their special relation to economic science, and after-
wards notice the corresponding movements in other European
countries which showed themselves before the appearance of
Adam Smith, or were at least unaffected by his influence.

BEFORE ADAM SMITH.
France.

The more liberal, as well as more rational, principles put
forward by the English thinkers of the new type began, early
in the eighteenth century, to find an echo in France, where
the clearer and more vigorous intellects were prepared for
their reception by a sense of the great evils which exaggerated
mercantilism, serving as instrument of political ambition, had
produced in that country. Tfre jmpnvpirishad- condition of
the agricultural population, the oppressive weight and unequal
imposition of taxation, and the unsound state of the public
finances had produced a general feeling of disquiet, and led
several distinguished writers to protest strongly against the
policy of Colbert and to demand a complete reform.

The most important amongst them was Pierre Boisguillebert
(d. 1 7 14), whose whole life was devoted to these controversies. In
his statistical writings (Detail de la France sous le regne present,

58 POLITICAL ECONOMY.

1697 ; Factum de la France, 1707), he brings out in gloomy
colours the dark side of the age of Louis XIV., and in hia
theoretic works (Trait'e de la nature et du commerce dea
grains; Dissertations sur la nature des richesses de V argent
et des tributs ; and Essai sur la rarete de T argent) he
appears as an earnest, even passionate, antagonist of the mer-
cantile school £He insists again and again on the fact that
national wealth does not consist in gold and silver, but in
useful things, foremost among which are the products of agri-
culture?^ He even goes so far as to speak of " argent criminel,"
which from being the slave of trade, as it ought to be, had
become its tyrant. He sets the "genuinely French Sully"
far above the " Italianising Colbert," and condemns all arbi-
trary regulations affecting either foreign or internal commerce,
especially as regards the corn trade. -Rational _ weaUji jjoea
not depend on Governments, whose interference does more
harm than good ; the natural laws of the economic order of
things cannot be violated or neglected with impunity; the
interests of the several classes of society in a system of free-
dom are identical, and those of individuals coincide with that
of the state. A similar solidarity exists between different
nations; in their economic dealings they are related to . the
world as individual towns to a. nation, and not merely plenty,
but peace and harmony, will result from their unfettered
intercourse. Men he divides into two classes — those who do
nothing and enjoy everything, and those who labour from
morning to night often without earning a bare subsistence ;
the latter he would favour in every way. Here we catch the
breath of popular sympathy which fills the social atmosphere of
the eighteenth century. He dwells with special emphasis on
the claims of agriculture, which had in France fallen into un-
merited neglect, and with a view to its improvement calls for
a reform in taxation. He would replace indirect taxes by
taxes on income, and would restore the payment of taxes in
kind, with the object of securing equality of burden and
eliminating every element of the arbitrary. He has some

SYSTEM OF NATURAL LIBERTY. 59

interesting views of a general character : tlmaJie approximates
to a correct conception of agricultural rent, and he points to
the order in which human wants follow each other, — those
X of necessity, convenience, comfort, superfluity, and ostentation
succeeding in the order named, and ceasing in the inverse
order to be felt as wealth 'decreases. The depreciating tone
in which Voltaire speaks of Boisguillebert (Siecle de Louis
XIV .^ chap. 30) is certainly not justified ; he had a great
economic talent, and his writings contain important germs of
truth. But he appears to have exerted little influence, theo-
retical or practical, in his own time.

The same general line of thought was followed by Marshal de
Vauban (1633-1707) in his economic tracts, especially that
bearing the title of Projet d'une dixme Roy ale, 1707, which
was suppressed by the authorities, and lost for him the favour
of his sovereign, but has added lustre to his name in the
judgment of posterity. He is deeply impressed with the
deplorable condition of the working classes of France in his
day. He urges that the ainrjiLihe Go vejnment should be
the welfare of all orders of the --community ; that all are
entitled to like favour and furtherance ; that the often despised
and wronged lower class is the basis of the social organisation ;
that labour is the foundation.^ ,^JI wealth, -and agriculture
the most important species of labour ; that the most essential
condition of successful industry is freedom ; and that all un-
necessary or excessive restrictions on manufactures and com-
merce should be swept away. He protests in particular against
the inequalities of taxation, and the exemptions and privileges
enjoyed by the higher ranks. With the

duties on consumption he would abolish all the existing taxes,
and substitute for them a single tax on income and land,
impartially applied to all classes, which he describes under
the name of "Dixme Koyale," that is to say, a tenth in kind
of all agricultural produce, and a tenth of money income
chargeable on manufacturers and traders.1

1 An English translation of the Dixme Royale was published in 1708.

60 POLITICAL ECONOMY.

The liberal and humane spirit of Fenelon led him to aspin
after freedom of commerce with foreign nations, and to preach
the doctrine that the true superiority of one state over anothei
lies in the number indeed, but also in the morality, in-
telligence, and industrious habits of its population. The
Telemaque, in which these views were presented in an
attractive form, was welcomed and read amongst all ranks and
classes, and was thus an effective organ for the propagation of
opinion.

After these writers there is a marked blank in the field of
French economic thought, broken only by the Reflexions
Politiques sur les Finances et le Commerce (1738) of Dutot,
a pupil of Law, and the semi-mercantilist Essais Politiques
sur le Commerce (1731) of Melon, till we come to the great
name of Montesquieu. The Esprit des Lois (i 748), so far as it
deals with economic subjects, is written upon the whole from
a point of view adverse to the mercantile system, especially in
his treatment of money, though in his observations on colonies
and elsewhere he falls in with the ideas of that system. His
immortal service, however, was not rendered by any special
research, but by his enforcement of the doctrine of natural
laws regulating social no less than physical phenomena.
There is no other thinker of importance on economic subjects
in France till the appearance of the- physiocrats,, which marks
an epoch in the history of the science. ^

The heads of the physiocratic school were Frar^ois Quesnay
(1694-1774) and Jean Claude Marie Vincent, sieur de
Gournay (1712-1759). The principles of the school had
been put forward in 1755 by Richard Cantillon, a Fiench
merchant of Irish extraction (Essai sur la nature du Commerce
en general), whose biography Jevons has elucidated,1 and
whom he regards as the true founder of political economy ;

1 " Richard Cantillon and the Nationality of Political Economy," in
Contemporary Review, Jan. l8§l. Cantillon is qnoted in the Wealth oj
tfatiom, bk. i. chap. 8.

SYSTEM OF NATURAL LIBERTY. 61

but it was in the hands of Quesnay and Gournay l that they
acquired a systematic form, and became the creed of a united
group of thinkers and practical men, bent on carrying them
into action. The members of the group called themselves
" les e"conomistes," but it is more convenient, because unam-
biguous, to designate them by the name " physiocrates,"
invented by Dupont de Nemours, who was one of their
number. In this name, intended to express the fundamental
idea of the school, much more is implied than the subjection
of the phenomena of the social, and in particular the economic,
world to fixed relations of co-existence and succession. This
is the positive doctrine which lies at the bottom of all true
science. But the law of nature referred to in the title of the
sect was something quite different. The theological dogma
which represented all the movements of the universe as
directed by divine wisdom and benevolence to the production
of the greatest possible sum of happiness had been trans-
formed in the hands of the metaphysicians into the conception
of B.JUS naturce, a harmonious and beneficial code established
by the favourite entity of these thinkers, Nature, antecedent
to human institutions, and furnishing the model to which
they should be made to conform. This idea, which Buckle
apparently supposes to have been an invention of Hutcheson's,
had come down through Eoman juridical theory from the
speculations of Greece.2 It was taken in hand by the modern
negative school from Hobbes to Rousseau, and used as a power-
ful weapon of assault upon the existing order of society, with
which the "natural" order was perpetually contrasted as offer-
ing the perfect type from which fact had deplorably diverged.
The theory received different applications according to the
diversity of minds or circumstances. By some it was directed
against the artificial manners of the times, by others against

1 Gournay strongly recommended to his friends Cantillon's book as
"ouvrage excellent qu'on negligeait." Memoires de Morellct, i. 38.

2 See Cliffe Leslie's Essay* in Political and Moral Philosophy, p.
151.

62 POLITICAL ECONOMY.

contemporary political institutions ; it was specially employed
by the physiocrats in criticising the economic practice of
European Governments.

The general political doctrine is as follows. Society is
composed of a number of individuals all having the~same
natural rights. If all do not possess (as some members of the
negative school maintained) equal capacities, each can at least
best understand his own interest, and is led by nature to follow
it. /The social union is really a contract between these
individuals, the object of which is the limitation of the
natural freedom of each, just so far as it is inconsistent with
the rights of the others. (Government, though necessary, is a
necessary eviH and the governing power appointed by consent
should be limited to the amount of interference absolutely
required to secure the fulfilment of the contract. In the
economic sphere, this implies the right of the individual to
such natural enjoyments as he can acquire by his labour.
*]HiaJ;Jabp.ur^Jflierj^ and unfettered ;

and its fruits should be guaranteed to the possessor ; in other
words, property should be sacred. Each citizen must be
allowed to make the most of his labour ; and therefore freedom
of exchange should be ensured, and competition in the market
should be unrestricted, no monopolies or privileges being
permitted to exist.

The physiocrats then proceed with the economic analysis as
follows. Only those labours are truly " Droductive " which
add to the quantity of raw materials available for the purposes
qf man ; and the real annual addition to the wealth of the
community consists of the excess of the mass of agricultural
products (including, of course, minerals) over their cost of
production. On the amount of this "produit net" depends
the wellbeing of the community, and the possibility of its
advance in civilisation. The manufacturer merely gives a new
form to the materials extracted from the earth ; jthe higher
value of the object, after it has passed through his hands, only
represents the quantity of provisions and other materials used

SYSTEM OF NATURAL LIBERTY. 63

.iii its elaboration. Commerce does nothing more
than transfer the wealth already existing from one hand to
another ; what the trading classes gain thereby is acquired at the
cost of the nation, and it is desirable that its amount should be
as small as possible. The occupation of the niauufacturer and
merchant, as well as the liberal professions, and every kind of
personal service, are "useful" indeed, but they are " sterile, "_
drawing their income, not from any fund which they themselves
create, but from the superfluous earnings of the agriculturists.
Perfect freedom of trade not only rests, as we have already seen,
on the foundation of natural right, but is also recommended by
the consideration thaJ^j^o^Jbs&Jdl^^ on which all

wealth and general progress depend, as large as" possible.
"Laissez faire, laissez passer " should therefore be the motto of
(j^^r^rnppt'Sf >ni^ TwtaVmft nl thp. state, which must be derived
altogether from this net product, ought to be raised in the most
direct and simplest way, — namely, by a single impost of the
nature of a land tax.1

The special doctrine relating to the exclusive productiveness of
agriculture arose out of a confusion between "value" on the one
hand and "matter and energy" on the other. Smith and others
have shown that the attempt to fix the character of "sterility"
on manufactures and commerce was founded in error. And
the proposal of a single impot territorial falls to the ground
with the doctrine on which it was based. But such influence
as the school exerted depended little, if at all, on these
peculiar tenets, which indeed some of its members did not
hold. The effective result of its teaching was mainly
destructive. It continued in a more systematic form the
efforts in favour of the freedom of industry already begun in
England and France. The essential historical office of the
physiocrats was to discredit radically the .methods followed by
the European Governments in their dealings with industry.
For such criticism as theirs there was, indeed, ample room:
the policy of Colbert, which could be only temporarily useful,

iProf. Ricca-Salemo (Le Dottrine Finanziarie in Inghilterra) has
called attention to the fact that the proposal of a single tax on land,
grounded on theoretic principles identical with those of the Physiocrats,
was put forward, and supported with much clearness and force, so early
as 1734, by Jacob Vanderlint, an Englishman, iu his tract entitled Money
answers all things.

64 POLITICAL ECONOMY.

had been abusively extended and intensified \ Governmental
action had intruded itself into the minutest details of business,
and every process of manufacture and transaction of trade wag
hampered by legislative restrictions. It was to be expected
that the reformers should, in the spirit of the negative philo-
sophy, exaggerate the vices of established systems ; and there
can be no doubt that they condemned too absolutely the
economic action of the state, both in principle and in its
historic manifestations, and pushed the " laissez faire " doctrine
beyond its just limits. But this was a necessary incident of
their connection with the revolutionary movement, of which
they really formed one wing. In the course of that movement,
the primitive social contract, the sovereignty of the people,
and other dogmas now seen to be untenable, were habitually
invoked in the region of politics proper, and had a transitory
utility as ready and effective instruments of warfare. And so
also in the economic sphere the doctrines of natural rights of
buying and selling, of the sufficiency of enlightened selfishness
as a guide in mutual dealings, of the certainty that each
member of the society will understand and follow his true
interests, and of the coincidence of those interests with the
public welfare, though they will not bear a dispassionate
examination, were temporarily useful as convenient and ser-
viceable weapons for the overthrow of the established order.
The tendency of the school was undoubtedly to consecrate the
spirit of individualism, and the state of non-government. But
this tendency, which may with justice be severely condemned
in economists of the present time, was then excusable because
inevitable. And, whilst it now impedes the work of recon-
struction which is for us the order of the day, it then aided
the process of social demolition, which was the necessary,
though deplorable, condition of a new organisation.

These conclusions as to the revolutionary tendencies of the
school are not at all affected by the fact that the form of
government preferred by Quesnay and some of his chief fol-
lowers was what they called a legal despotism, which should

SYSTEM OF NATURAL LIBERTY. 65

embrace within itself both the legislative and the executive
function. The reason for this preference was that an enlightened
central power could more promptly and efficaciously introduce
the policy they advocated than an assembly representing diver-
gent opinions, and fettered by constitutional checks and limita-
tions. Turgot, as we know, used the absolute power of the
crown to carry into effect some of his measures for the liberation
of industry, though he ultimately failed because unsustained by
the requisite force of character in Louis XVI. But what the
physiocratic idea with respect to the normal method of govern-
ment was appears from Quesnay's advice to the dauphin, that
when he became king he should "do nothing, but let the laws
rule," the laws having been of course first brought into con-
formity with the jus naturce. The partiality of the school for
agriculture was in harmony with the sentiment in favour of
" nature" and primitive simplicity which then showed itself in so
many forms in France, especially in combination with the revo-
lutionary spirit, and of which Rousseau was the most eloquent
exponent. It was also associated in these writers with a just in-
dignation at the wretched state in which the rural labourers of
France had been left by the scandalous neglect of the superior
orders of society — a state of which the terrible picture drawn by
La Bruyere is an indestructible record. The members of the
physiocratic group were undoubtedly men of thorough upright-
ness, and inspired with a sincere desire for the public good,
especially for the material and moral elevation of the working
classes. Quesnay was physician to Louis XV., and resided in
the palace at Versailles; but in the midst of that corrupt court
he maintained his integrity, and spoke with manly frankness
what he believed to be the truth. And never did any statesman
devote himself with greater singleness of purpose or more earnest
endeavour to the service of his country than Turgot, who was
the principal practical representative of the school.

The publications in which Quesnay expounded his system
were the following:1 — Two articles, on "Fermiers" and on

1 A complete edition of the (Euvres gconomiques et philosophiques of
Quesnay was published by Oncken in 1888.

66 POLITICAL ECONOMY.

"Grains," in the Encyclopedic of Diderot and D'AIemberl
(1756, 1757) ; a discourse on the law of nature in the Physio-
cratie of Dupont de Nemours (1768); Maximes generates de
gouvernement economique d'un royaume agricole (1758), and
the simultaneously published Tableau Economique avec son
explication, ou Extrait des Economies Royales de Sully (with
the celebrated motto "pauvres paysans, pauvre royaume;
pauvre royaume, pauvre roi"); Dialogue sur le commerce et
les travaux des artisans ; and other minor pieces. The Tableau
Economique, though on account of its dryness and abstract
form it met with little general favour, may be considered the
principal manifesto of the school. It was regarded by the
followers of Quesnay as entitled to a place amongst the fore-
most products of human wisdom, and is named by the elder
Mirabeau, in a passage quoted by Adam Smith,1 as one of the
three great inventions which have contributed most to the
stability of political societies, the other two being those of
writing and of money. Its object was to exhibit by means of
certain formulas the way in which the products of agriculture,
which is the only source of wealth, would in a state of perfect
liberty be distributed among the several classes of the com
munity (namely, the productive classes of the proprietors and
cultivators of land, and the unproductive class composed of
manufacturers and merchants), and to represent by other for-
mulas the modes of distribution which take place under systems
of Governmental restraint and regulation, with the evil results
arising to the whole society from different degrees of such
violations of the natural order. It follows from Quesnay's
theoretic views that the one thing deserving the solicitude of
the practical economist and the statesman is the increase of
the net product; and he infers also what Smith afterwards
affirmed on not quite the same ground, that the interest of the
landowner is "strictly and inseparably connected with the
general interest of the society." *

1 Wealth of Nativn*, bk. iv. chap. 9. a Ibid. bk. L, chap. if.

SYSTEM OF NATURAL LIBERTY. 67

M. de Gournay, as we have seen, was regarded as one of
the founders of the school, and appears to have exercised some
influence even upon the formation of Quesnay's own opinions.
With the exception of translations of Culpeper and Child,1
Gournay wrote nothing but memoirs addressed to ministers,
which have not seen the light ; but we have a full statement
of his views in the Jfiloge dedicated to his memory by his
illustrious friend Turgot. Whilst Quesnay had spent his
youth aioidst rural scenes, and had been early familiar with
the labours of the field, Gournay had been bred as a merchant,
and had passed from the counting-house to the office of inten-
dant of commerce. They thus approached the study of political
economy from different sides, and this diversity of their ante-
cedents may in part explain the amount of divergence which
existed between their views. Gournay softened the rigour
of Quesnay's system, and brought it nearer to the truth, by
rejecting what Smith calls its "capital error" — the doctrine,
namely, of the unproductiveness of manufactures and com-
merce. He directed his efforts to the assertion and vindica-
tion of the principle of industrial liberty, and it was by him
that this principle was formulated in the phrase, since so often
heard for good and for evil, " Laissez faire et laissez passer."
One of the earliest and most complete adherents of the physio-
cratic school, as well as an ardent and unwearied propagator
of its doctrines, was Victoy Mi^p.au. whose sincere and inde-
pendent, though somewhat perverse and whimsical, character
is familiar to English readers through Carlyle's essay on his
more celebrated son. He had expressed some physiocratic
views earlier than Quesnay, but owned the latter for his spiritual
father, and adopted most of his opinions, the principal dif-
ference being that he was favourable to the petite as opposed
to the grande culture, which latter was preferred by his
chief as giving, not indeed the largest gross, but the largest

1 Gournay's inspiration was, without doubt, largely English. "II
avait lu," says Morellet, "de bons livres Anglais d' Economic politique^
tels que Petty, Davenant, Gee, Child, Ac." — JMtmoirei, i 38.

68 POLITICAL ECONOMY.

net product. Mirabeau's principal writings were Ami des
Hommes, ou traite sur la population (1756, 1760), Theorie dt
Vimpdt (1760), Les jZconomiques (1769), and Philosophi6
rurale, ou ficonomie generale et politique de T Agriculture
(1763). The last of these was the earliest complete exposition
of the physiocratic system. Another earnest and persevering
apostle of the system was Dupont de Kemoiirs (1739-1817),
known by his treatises De ^exportation et de ^importation det
grains (1764), De I'origine et des progres d'une science nouvelle
(1767), Du commerce de la Compagnie des Indes (1767), and
especially by his more comprehensive work Physiocratie, ou
Constitution naturelle du gouvernement le plus avantageux au
genre humain (1768). The title of this work gave, as has
been already mentioned, a name to the school. Another
formal exposition of the system, to which Adam Smith refers
as the " most distinct and best connected account " of it, was
produced by Mercier-Larivierer under the title L'Ordre naturel
et essentiel des societes politiques (1767), a title which is inte-
resting as embodying the idea of the jus naturae.1 Both he and
Dupont de Nemours professed to study human communities,
not only in relation to their economic, but also to their political
and general social aspects ; but, notwithstanding these larger
pretensions, their views were commonly restricted in the main
to the economic sphere; at least material considerations de-
cidedly preponderated in their inquiries, as was naively indi-
cated by Lariviere when he said, " Property, security, liberty —
these comprise the whole social order ; the right of property is
a tree of which all the institutions of society are branches."

The most eminent member of the group was without doubt
AnneJRobert Jacques Turgot (i 727-^7 §i). This is not the
place to speak of his noble practical activity, first as intendant
of Limoges, and afterwards for a brief period as finance
minister, or of the circumstances which led to his removal
from office, and the consequent failure of his efforts for the
salvation of France. His economic views are explained in
the introductions to his edicts and ordinances, in letters and

1 Other less prominent members of the group were Letrosni and the
Abbe Baudeau.

SYSTEM OF NATURAL LIBERTY. 69

occasional papers, but especially in his Reflexions sur la forma-
tion et la distribution des richesses (1766). This is a con-
densed but eminently clear and attractive exposition of the
fundamental principles of political economy, as they were con-
ceived by the physiocrats. It embodies, indeed, the erroneous
no less than the sound doctrines of that school ; but several
subjects, especially the various forms of land-economy, the
different employments of capital, and the legitimacy of
interest, are handled in a generally just as well as striking
manner ; and the mode of presentation of the ideas, and the
luminous arrangement of the whole, are Turgot's own. The
treatise, which contains a surprising amount of matter in pro-
portion to its length, must always retain a place among the
classics of the science.

4jrhe physiocratic school never obtained much direct popular
influence, even in its native country, though it strongly
attracted many of the more gifted and earnest mind^ Its
members, writing on dry subjects in an austere and often
heavy style, did not find acceptance with a public which
demanded before all things charm of manner in those who
addressed it. When Morellet, one of their number, entered
the lists with Galiani, it was seen how esprit and eloquence
could triumph over science, solid indeed, but clumsy in its
movements.1 The physiocratic tenets, which were in fact
partially erroneous, were regarded by many as chimerical, and
were ridiculed in the contemporary literature, as, for example,
the impdt unique by Voltaire in his Uhomme aux quarante
ecus, which was directed in particular against Mercier-
Lariviere. It was justly objected to the group that they were

1 On Galiaui's Dialogues, see page 72. Soon after the appearance of
this book Turgot wrote to Mile, de Lespinasse — " Je crois possible de lui
faire une tres bonne reponse; mais cela demande bien de 1'art. Les
economistes sont trop confiants pour combattre centre un si adroit
ferrailleur. Pour 1'abbe Morellet, il ne faut pas qu'il y pense."
Morellet's work was prohibited by the Controller-General Terray;
though printed in 1770, some months after Galiani's, it was not published
till 1774. Adam Smith speaks of Morellet as " an eminent French author,
of great knowledge in matters of political economy " (Bk. v. chap. i).

70 POLITICAL ECONOMY.

too absolute in their view of things ; they supposed, as Smith
remarks in speaking of Quesnay, that the body-politic could
thrive only under one precise regime, — that, namely, which
they recommended, — and thought their doctrines universally
and immediately applicable in practice.1 They did not, as
theorists, sufficiently take into account national diversities,2
or different stages in social development; nor aid they, as
politicians, adequately estimate the impediments which ignor-
ance, prejudice, and interested opposition present to enlightened
statesmanship. It is possible that Turgot himself, as Grimm
suggests, owed his failure in part to the too unbending rigour
of his policy and the absence of any attempt at conciliation.
Be this as it may, his defeat helped to impair the credit of his
principles, which were represented as having been tried and
found wanting.

The physiocratic system, after guiding in some degree
the policy of the Constituent Assembly, and awakening a
few echoes here and there in foreign countries, soon ceased
to exist as a living power ; but the good elements it com-
prised were not lost to mankind, being incorporated into the
sounder and more complete construction of Adam Smith.

ITALY.

In Italy, as in the other European nations, there was little
activity in the economic field during the first half of the
eighteenth century. It was then, however, that a really
remarkable man appeared, the archdeacon Salustio Antonio
Bandini (1677-1760), author of the Discorso sulla Maremma
Sienese, written in 1737, but not published till 1775. The

1 Hume, in a letter to Morellet, 1769, calls them "the set of men the
most chimerical and arrogant that now exist." He seems intentionally
to ignore Morellet's close connection with them.

2 Turgot said, " Quiconque n'oublie pas qu'il y a des e*tats politiques
se'pare's les uns des autres et constitue"s diversement, ne traitera jamaia
bien aucune question d'Economie politique." — Letter to Mile, de
Lespinasse, 1770.

SYSTEM OF NATURAL LIBERTY. 7*

object of the work was to raise the Maremma from the
wretched condition into which it had fallen through the
decay of agriculture. This decay he showed to be, at least
in part, the result of the wretched fiscal system which wag
in force ; and his book led to important reforms in Tuscany,
where his name is held in high honour. Not cnly by
Pecchio and other Italian writers, but by Eoscher also, he
is alleged to have anticipated some leading doctrines of the
physiocrats, but this claim is disputed. There was a remarkable
renascence of economic studies in Italy during the latter half
of the century, partly due to French influence, and partly, it
would appear, to improved government in the northern states.
The movement at first followed the lines of the mercantile
school. Thus, in Antonio Broggia's Trattati dei tributi e delle
monete e del governo politico della societa (1743), and Girolamo
Belloni's Diss&rtazione sopra il commercio (1750), which seems
to have had a success and reputation much above its merits,
mercantilist tendencies decidedly preponderate. But the most
distinguished writer who represented that economic doctrine
in Italy in the last century was Antonio Genovesi, a Neapolitan
(1712-1769). He felt deeply the depressed intellectual and
moral state of his fellow-countrymen, and aspired after a
revival of philosophy and reform of education as the first
condition of progress and wellbeing. With the object of pro-
tecting him from the theological persecutions which threatened
him on account of his advanced opinions, Bartolomeo Intieri.
of whom we shall hear again in relation to Galiani, founded
in 1755, expressly for Genovesi, a chair of commerce and
mechanics, one of the conditions of foundation being that it
should never be filled by a monk. This was the first pro-
fessorship of economics established in Europe ; the second was
founded at Stockholm in 1758, and the third in Lombardy
ten years later, for Beccaria. The fruit of the labours of
Genovesi in this chair was his Lezioni di commercio, ossia di
eeonomia civile (1769), which contained the first systematic
treatment of the whole subject which had appeared in Italy,

72 POLITICAL ECONOMY.

As the model for Italian imitation he held up England, a
country for which, says Pecchio, he had a predilection almost
amounting to fanaticism. He does not rise above the false
economic system which England then pursued ; but he rejecta
some of the grosser errors of the school to which he belonged ;
he advocates the freedom of the corn trade, and deprecates
regulation of the interest on loans. In the spirit of his age,
he denounces the relics of mediaeval institutions, such as
entails and tenures in mortmain, as impediments to the
national prosperity. Ferdinando Galiani was another dis-
tinguished disciple of the mercantile school. Before he had
completed his twenty-first year he published a work on money
(Delia moneta libri cinque, 1750), the principles of which are
supposed to have been dictated by two experienced practical
men, the Marquis Rinuccini and Bartolomeo Intieri, whose
name we have already met. But his reputation was made
by a book written in French and published in Paris, where
he was secretary of embassy, in 1770, namely, his Dialogues
sur le commerce des Hies. This work, by its light and pleasing
style, and the vivacious wit with which it abounded, delighted
Voltaire, who spoke of it as a book in the production of which
Plato and Moliere might have been combined ! * The author,
says Pecchio, treated his arid subject as Fontenelle did the
vortices of Descartes, or Algarotti the Newtonian system of
the world. The question at issue was that of the freedom of
the corn trade, then much agitated, and, in particular, the
policy of the royal edict of 1764, which permitted the ex-
portation of grain so long as the price had not arrived at a
certain height. The general principle he maintains is that
the best system in regard to this trade is to have no system,
—countries differently circumstanced requiring, according to
him, different modes of treatment. This seems a lame and
impotent conclusion from the side of science; yet doubtless

1 So also Grimm : " C'est Platon avec la verve et lea geetei
d'Arlequin." Diderot called the book " modele de dialogues qui tester*
\ e&te" des lettres de Pascal"

SYSTEM OF NATURAL LIBERTY. 7$

the physiocrats, with whom his controversy lay, prescribed
on this, as on other subjects, rules too rigid for the safe
guidance of statesmen, and Galiani may have rendered a
real service by protesting against their absolute solutions of
practical problems. He fell, however, into some of the most
serious errors of the mercantilists, — holding, as indeed did also
Voltaire and even Yerri, that one country cannot gain with-
out another losing, and in his earlier treatise going so far as to
defend the action of Governments in debasing the currency.

Amongst the Italian economists who were most under the
influence of the modern spirit, and in closest harmony with the
general movement which was impelling the Western nations
towards a new social order, Cesare Beccaria (1738-1794) holds
a foremost place. He is best known by his celebrated treatise
Dei delitti e delle p&ne, by which Voltaire said he had made
himself a benefactor of all Europe, and which, we are told,
has been translated into twenty-two languages. The Empress
Catherine having invited him to fix his residence at St.
Petersburg, the Austrian Government of Lombardy, in order
to keep him at home, established expressly for him a chair of
political economy ; and in his Elementi di economic* pubblica
(1769-1771 ; not published, however, till 1804) are embodied
his teachings as professor. The work is unfinished : he had
divided the whole subject under the heads of agriculture,
manufactures, commerce, taxation, government; but he has
treated adequately only the first two heads, and the last two
not at all, having been called to take part in the councils of the
state. He was in some degree under the influence of physio-
cratic ideas, and holds that agriculture is the only strictly
productive form of industry, whilst manufacturers and artisans
are a sterile class. He was strongly opposed to monopolies
and privileges, and to corporations in arts and trades; in
general he warmly advocated internal industrial freedom,
though in regard to foreign commerce a protectionist. In the
special case of the corn trade he was not, any more than
Galiani, a partisan of absolute liberty. His exposition of

74 POLITICAL ECONOMY.

economic principles is concise and sententious, and he often
states correctly the most important considerations relating to
his subject without adding the developments which would
he desirable to assist comprehension and strengthen convic-
tion. Thus on fixed capital (capitali fondatori), as distinct
from circulating (annui), in its application to agriculture, he
presents in a condensed form essentially the same explana-
tions as Turgot about the same time gave ; and on the division
of labour and the circumstances which cause different rates of
wages in different employments, he in substance comes near
to Smith, but without the fulness of illustration which is so
attractive a feature of the Wealth of Nations. Pietro Verri
(1728-1797), an intimate and life-long friend of Beccaria, was
for twenty-five years one of the principal directors of the
administration of Lombardy, in which capacity he originated
many economic and other reforms. In his Riflessioni sulle
leggi vincolanti, principalmente nel commercio dd grant (written
in 1769, printed in 1796), he considers the question of the
regulation of the corn trade both historically and in the light
of theoretic principles, and arrives at the conclusion that
liberty is the best remedy against famine and against excessive
fluctuations of price. He is generally opposed to Govern-
mental interference with internal commerce, as well as to
trade corporations, and the attempts to limit prices or fix the
rate of interest, but is in favour of the protection of national
industry by a judiciously framed tariff. These views are
explained in his Meditazioni suW economia politica (1771), an
elementary treatise on the science, which was received with
favour, and translated into several foreign languages. A
primary principle with him is what he calls the augmenta-
tion of reproduction — that is, in Smith's language, of " the
annual produce of the land and labour " of a nation ; and
by its tendency to promote or to restrict this augmentation,
he tests every enactment and institution. Accordingly,
unlike Beccaria, he prefers the petite to the grande culture,,
as giving a larger total produce. In dealing with taxation,

SYSTEM OF NATURAL LIBERTY. 7$

he rejects the physiocratic proposal of a single impdt terri
torial.1 Giovanni R. Carli (1720-1795), also an official pro-
moter of the reforms in the government of Austrian Lombardy,
besides learned and sound treatises on money, was author of
Ragionamenti sopra i Inland economici delle nazioni, in which
he shows the falsit} of the notion that a state gains or loses in
foreign commerce according to the so-called balance of trade.
In his letter to Pompeo Neri Sul libero commercio de' grani
(1771), he takes np a position similar to that of Galiani,
regarding the question of the freedom of the corn trade as not
so much a scientific as an administrative one, to be dealt with
differently under different local or other conditions. Reject-
ing the physiocratic doctrine of the exclusive productiveness
of agriculture, he illustrates in an interesting way the neces-
sity of various economic classes in a society, and the reflex
agency of manufactures in stimulating the cultivation of the
soil. Giambattista Vasco (1733-1796) wrote discourses on
several questions proposed by academies and sovereigns. In
these he condemns trade corporations and the attempts by
Governments to fix the price of bread and to limit the interest
on loans. In advocating the system of a peasant proprietary,
he suggests that the law should determine the minimum and
maximum portions of land which a citizen should be per-
mitted to possess. He also, with a view to prevent the undue
accumulation of property, proposes the abolition of the right
of bequest, and the equal division of the inheritance amongst
the children of the deceased. Gaetano Filangieri (1752-1788),
one of the Italian writers of the last century whose names are
most widely known throughout Europe, devoted to economic

1 J. S. Mill, in his Principles, bk. i. chap. I, takes credit to his father
for having first illustrated and made prominent in relation to produc-
tion what he strangely calls "a fundamental principle of Political
Economy," namely, that "all that man does or can do with matter" is
to " move one thing to or from another." But this is clearly put forward
by Verri in his Meditazioni, sect. 3: "Accostare e separare sono gli
unici element! che 1'ingegno umano ritrova analizzando 1'iJea della
riproduzione."

76 POLITICAL ECONOMY.

questions the second book of his Scienza delta legislations (5
vols., 1780-1785). Filled with reforming ardour and a pas-
sionate patriotism, he employed his vehement eloquence in
denouncing all the abuses of his time. Apparently without
any knowledge of Adam Smith, he insists on unlimited free,
dom of trade, calls for the abolition of the mediaeval institu-
tions which impeded production and national wellbeing, and
condemns the colonial system then followed by England,
Spain, and Holland. He prophecies, as Eaynal, Turgot, and
Genovesi had done before him, that all America would one
day be independent, a prediction which probably helped to
elicit Benjamin Franklin's tribute of admiration for his work.
Bather a propagator than a discoverer, he sometimes adopted
from others erroneous opinions, as, for example, when he
approves the impdt unique of the physiocrats. On the whole,
however, he represents the most advanced political and social
tendencies of his age ; whilst strongly contrasted with Beccaria
in temperament and style, he was a worthy labourer in the
same cause of national and universal progress. Ludovico
Ricci (1742-1799) was author of an able report Sulla riforma
degli istituti pit della cittct di Modena (1787). He treated the
subject of poor relief and charitable institutions in so general
a way that the work possesses a universal and permanent in-
terest. He dwells on the evils of indiscriminate relief as
tending to increase the misery it seeks to remove, and as
lowering the moral character of a population. He exposes
especially the abuses connected with lying-in and foundling
hospitals. There is much in him which is akin to the views
of Malthus ; like him he is opposed to any state provision for
the destitute, who ought, he thinks, to be left to voluntary
private beneficence. Ferdinando Paoletti (1717-1801) was
an excellent and public-spirited priest, who did much for the
diffusion of intelligence amongst the agricultural population of
Tuscany, and for the lightening of the taxes which pressed
upon them. He corresponded with Mirabeau ("Friend of
Men"), and appears to have accepted the physiocratic doc-

SYSTEM OF NATURAL LIBERTY. 77

trines, at least in their general substance. He was author of
Pensieri sopra, Vagricoltura (1769), and of / veri mezzi d\
render felici le societct (1772) ; in the latter he advocates the
freedom of the corn trade. The tract // Colbertismo (1791)
by Count Francesco Mengotti is a vigorous protest against the
sxtreme policy of prohibition and protection, which may still
be read with interest. Mengotti also wrote (1791) a treatise
Del commercio dd Romani, directed mainly against the ex-
aggerations of Huet in his Histoire du commerce et de la
navigation des anciens (1716), and useful as marking the broad
difference between the ancient and modern civilisations.

Here lastly may be mentioned another Italian thinker who,
eminently original and even eccentric, cannot easily be classed
among his contemporaries, though some Continental writers
of our own century have exhibited similar modes of thought.
This was Giammaria Ortes (1713-1790). He is opposed to
the liberalist tendencies of his time, but does not espouse the
doctrines of the mercantile system, rejecting the theory of the
balance of trade, and demanding commercial freedom. It is
in the Middle Ages that he finds his social and economic
type. He advocates the maintenance of church property, is
averse to the ascendency of the money power, and has the
mediaeval dislike for interest on loans. He entertains the
singular idea that the wealth of communities is always and
everywhere in a fixed ratio to their population, the latter being
determined by the former. Poverty, therefore, necessarily
waits on wealth, and the rich, in becoming so, only gain what
the poor lose. Those who are interested in the improve-
ment of the condition of the people labour in vain, so long
as they direct their efforts to the increase of the sum
of the national wealth, which it is beyond their power
to alter, instead of to the distribution of that wealth, which
it is possible to modify. The true remedy for poverty lies
in mitigating the gain-pursuing propensities in the rich and
in men of business. Ortes studied in a separate work the
rabject of population; he formulates its increase as "geo-

78 POLITICAL ECONOMY.

metrical," but recognises that, as a limit is set to such increase
amongst the lower animals by mutual destruction, so is it in
the human species by " reason " — fj)e " prudential restraint n
of which Malthus afterwards made so much. He regards th«
institution of celibacy as no less necessary and advantageous
than that of marriage. He enunciates what has since been
known as the " law of diminishing returns to agricultural in-
dustry." He was careless as to the diffusion of his writings ; and
hence they remained almost unknown till they were included
in the Custodi collection of Italian economists, when they
attracted much attention by the combined sagacity and way-
wardness which marked their author's intellectual character.

SPAIN.

The same breath of a new era which was in the air else-
where in Europe made itself felt also in Spain.

In the earlier part of the eighteenth century Geronimo
Ustariz had written his Teorica y Practica del Comercio
y Marina (1724; published, 1740; Eng. transL by John
Kippax, 1751 ; French by Forbonnais, 1753), in which he
carries mercantile principles to their utmost extreme.

The reforming spirit of the latter half of the century was
best represented in that country by Pedro Rodriguez, Count
of Campomanes (1723-1802). He pursued with ardour the
Bame studies and in some degree the same policy as his illus-
trious contemporary Turgot, without, however, having arrived
at so advanced a point of view. He was author of Respuesta
fiscal sobre abolir la tasa y establecer el comercio de granos
(1764), Discurso sobre el fomento de industria popolar (1774),
and Discurso sobre la education de los artesanos y su fomento
(1775). By means of these writings, justly eulogised by
Robertson,1 as well as by his personal efforts as minister, he
sought to establish the freedom of the corn trade, to remove
the hindrances to industry arising from mediaeval survivals,

1 History of America, note 193,

SYSTEM OF NATURAL LIBERTY. 79

to give a large development to manufactures, and to liberate
agriculture from the odious burdens to which it was subject.
He saw that, notwithstanding the enlightened administration
of Charles III., Spain still suffered from the evil results of
the blind confidence reposed by her people in her gold mines,
and enforced the lesson that the real sources of the wealth and
power of his country must be sought, not in America, but in
hbr own industry.

In both Italy and Spain, as is well observed by Comte,1
the impulse towards social change took principally the direc-
tion of economic reform, because the pressure exercised by
Governments prevented so large a measure of free speculation
in the fields of philosophy and general politics as was possible
in France. In Italy, it may be added, the traditions of the
great industrial past of the northern cities of that country
also tended to fix attention chiefly on the economic side of
public policy and legislation.

GERMANY.

We have seen that in Italy and England political economy
had its beginnings in the study of practical questions relating
chiefly to money or to foreign commerce. In Germany it
arose (as Roscher has shown) out of the so-called cameralistic
sciences. Soon after the close of the Middle Ages there existed
in most German countries a council, known as the Kammer
(Lat. camera), which was occupied with the management of
the public domain and the guardianship of regal rights. The
Emperor Maximilian found this institution existing in Bur-
gundy, and established, in imitation of it, aulic councils at
Innspruck and Vienna in 1498 and 1501. Not only finance
and taxation, but questions also of economic police, came to
be entrusted to these bodies. A special preparation became
necessary for their members, and chairs of cameralistic science

1 Philosophic Positive, voL v. p. 759.

8o POLITICAL ECONOMY.

were founded in universities for the teaching of tiie appro-
priate body of doctrine. One side of the instruction thus
given borrowed its materials from the sciences of external
nature, dealing, as it did, with forestry, mining, general
technology, and the like ; the other related to the conditions
of national prosperity as depending on human relations and
institutions ; and out of the latter, German political economy
was at first developed.

In no country had mercantilist views a stronger hold than
in Germany, though in none, in the period we are now con-
sidering, did the system of the balance of trade receive a less
extensive practical application. All the leading German
economists of the seventeenth century — Bornitz, Besold,
Klock, Becher, Horneck, Seckendorf, and Schroder — stand on
the common basis of the mercantile doctrine. And the same
may be said of the writers of the first half of the eighteenth
century in general, and notably of Justi (d. 1771), who was
the author of the first systematic German treatise on political
economy, a work which, from its currency as a text book, had
much effect on the formation of opinion. Only in Zincke
(1692-1769) do we find occasional expressions of a circle of
ideas at variance with the dominant system, and pointing in
the direction of industrial freedom. But these writers, except
from the national point of view, are unimportant, not having
exercised any influence on the general movement of European
thought.

The principles of the physiocratic system met with a
certain amount of favour in Germany. Karl Friedrich, Mar-
grave of Baden, wrote for the use of his sons an Abrege des
prindpes d?$conomie Politiqiie, 1772, which is in harmony
with the doctrines of that system. It possesses, however,
little scientific value. Schlettwein ( 1 731—1 802) and Mauvillon
(1743-1794) were followers of the same school Theodor
Schmalz (1764-1831), who is commonly named as "the last
of the physiocrats," may be here mentioned, though somewhat
out of the historic order. He compares Colbertism with the

SYSTEM OF NATURAL LIBERTY. 81

Ptolemaic system, physiocratism with the Copernican. Adam
Smith he represents as the Tycho Brahe of political economy,
— a man of eminent powers, who could not resist the force
of truth in the physiocrats, but partly could not divest himself
of rooted prejudices, and partly was ambitious of the fame
of a discoverer and a reconciler of divergent systems. Though
Smith was now " the fashion," Schmalz could not doubt that
Quesnay's doctrine was alone true, and would ere long be
triumphant everywhere.1

Just before the appearance of Smith, as in England Steuart,
and in Italy Genovesi, so in Austria Sonnenfels (1733—1817),
the first distinguished economist of that country, sought to
present the mercantile system in a modified and more enlight-
ened form ; and his work (Grundsatze der Polizei, Handlung,
und Finanz, 1765; 8th ed., 1822), exercised even during a
considerable part of the present century much influence on
opinion and on policy in Austria.

But the greatest German economist of the eighteenth cen-
tury was, in Eoscher's opinion, Justus Moser (1720-1794), the
author of Patriotische Phantasieen (17 74), a series of fragments,
which, Goethe nevertheless declares, form "ein wahrhattes
Ganzes." The poet was much influenced by Moser in his
youth, and has eulogised in the Diehtung und Wahrheit (Bk.
xiii.) his spirit, intellect, and character, and his thorough in-
sight into all that goes on in the social world. Whilst others
occupied themselves with larger and more prominent public
affairs and transactions, Moser observed and reproduced the
common daily life of his nation, and the thousand "little
things " which compose the texture of popular existence. He
has been compared to Franklin for the homeliness, verve,
and freshness of his writings. In opinions he is akin to
the Italian Ortes. He is opposed to the whole spirit of the
" Aufklarung," and to the liberal and rationalistic direction
of which Smith's work became afterwards the expression. He
is not merely conservative but reactionary, manifesting a
preference for mediaeval institutions such as the trade guilds,

1 Roscher, Geschichte der N.O. in Deutschland, p. 498.

F

82 POLITICAL ECONOMY.

and, like Carlyle in our own time, seeing advantages even in
serfdom, when compared with the sort of freedom enjoyed by the
modern drudge. He has a marked antipathy for the growth of
the money power and of manufactures on the large scale, and for
the highly developed division of labour. He is opposed to abso-
lute private property in land, and would gladly see revived such
a system of restrictions as in the interest of the state, the com-
mune, and the family were imposed on mediaeval ownership. In
his wayward and caustic style, he often criticises effectively the
doctrinaire narrowness of his contemporaries, throws out many
striking ideas, and in particular sheds real light on the economic
phenomena and general social conditions of the Middle Ages.

THE NETHERLANDS.

In the Netherlands, tendencies towards the new economic ideas
showed themselves about the middle of the seventeenth century.
Dirck Graswinckel (1600-1668) advocated free trade in corn,
and was in general opposed to restrictions on industry. Pieter
de la Court (1618-1685) dealt in a similar spirit with most of
the practical questions of his country and age. He is in favour
of the perfect liberty of citizens to buy and sell, produce and
consume, as well as to learn and teach ; and he sharply criticised
the system of trade corporations. He was in literary alliance
with the Grand Pensionary, John de Witt. His principal work
(Aanwysing der heilsame politike gronden en Maximan van de
RepuUike van Holland en Westfriesland, 1669^ was commonly
attributed to that statesman. It is better known in the French
translation (1709) which appeared under the title of Memoires
de Jean de Witt. Jan de la Court (1622-1660), the brother
of Pieter, followed the same direction. The works of Salmasius
(1639, 1640) were of great importance in the controversy on the
necessity and lawfulness of interest on money loans. It is per-
haps to this work that recourse may best be had by the student

1 An earlier work of P. de la Court, the Interest van Holland ofte
Gronden van Hollands-Welvaren (1662), was much read in the seven-
teenth century. There are one English and three German translations
of this book.

SYSTEM OF NATURAL LIBERTY. 82 a

who wishes to make himself fully acquainted with the results of
German study in the several departments of economic theory.
It contains also valuable information on statistical questions and
matters of practical detail. Besides Brentano, Nasse, Sax,
Schonberg, von Scheel, and Wagner, whose names are mentioned
elsewhere in the present history, articles have been contributed
to it by many other distinguished writers, as by F. J. Neumann
on the Fundamental Conceptions of the Science, by Th. von der
Goltz and A. Meitzen on Agricultural Economy ; by W. Lexis
on Consumption and on Trade ; and by G. von Rumelin on the
Doctrine of Population. The Second and Third Parts are de-
voted respectively to the treatment of Finanzivissenschaft and
Vorwaltungslehre, and here will be found much instructive mat-
ter on Taxation and Public Credit, on the Organization of Gov-
ernment Departments in England, France, and Germany, and on
Sanitary and Poor-Law administration.

ADAM SMITH, WITH HIS IMMEDIATE PREDECESSORS
AND HIS FOLLOWERS.

England.

The stagnation in economic inquiry which showed itself in
England in the early part of the eighteenth century was not
broken by any notable manifestation before 1735, when Bishop
Berkeley put forward in his Querist, with much force and point,
views opposed to those of the mercantile school on the nature
of national wealth and the functions of money, though not with-
out an admixture of grave error. But soon a more decisive advance
was made. Whilst in France the physiocrats were working after
their own fashion towards the construction of a definitive system
of political economy, a Scottish thinker of the first order was elu-
cidating, in a series of short but pregnant essays, some of the fun-
damental conceptions of the science. What had been written on
these questions in the English language before his time had
remained almost altogether within the limits of the directly prac-
tical sphere. With Locke, indeed, the general system of the
modern critical philosophy had come into relation with economic
inquiry, but only in a partial and indeterminate way. But

SYSTEM OF NATURAL LIBERTY. 83

in Hnme the most advanced form of this philosophy was
represented, and his appearance in the field of economics
decisively marks the tendency of the latter order of specula-
tion to place itself in connection with the largest and deepest
thought on human nature and general human history. Most
of the essays here referred to first appeared in 1752, in a
volume entitled Political Discourses, and the number was
completed in the collection of Essays and Treatises on Several
Subjects, published in the following year. The most important
of them are those on Commerce, on Money, on Interest, and
on the Balance of Trade. Yet these should not be separated
from the rest, for, notwithstanding the unconnected form of
these little treatises, there runs through them a profound
unity of thought, so that they indeed compose in a certain
sense an economic system. They exhibit in full measure
Hume's wonderful acuteness and subtlety, which indeed some-
times dispose him to paradox, in combination with the breadth,
the absence of prejudice, and the social sympathies which so
eminently distinguish him ; and they offer, besides, the charm
of his easy and natural style and his rare power of lucid
exposition.

In the essay on money he refutes the mercantilist error,
which tended to confound it with wealth. " Men_ajid^cd«a-
modities," he says, "are the real strength of any community."
a In the national stock of labour consists all real power and
riches." Money is only the oil which makes the movements
of the mechanism of commerce more smooth and easy. He
shows that, from the domestic as distinguished from the
international point of view, the absolute quantity of money,
supposed as of fixed amount, in a country is of no consequence,
whilst an excessive quantity, larger, that is, than is required
for the interchange of commodities, may be injurious as raising
prices and driving foreigners from the home markets. He
goes so far, in one or two places, as to assert that the value of
money is chiefly fictitious or conventional, a position which
cannot be defended ; but it must not be pressed against him,

84 POLITICAL ECONOMY.

as he builds nothing on it. He has some very ingenious
observations (since, however, questioned by J. S. Mill) on the
effects of the increase of money in a country in stimulating
industry during the interval which takes place before the
additional amount is sufficiently diffused to alter the whole
scale of prices. He shows that the fear of the money of an
industrious community being lost to it by passing into foreign
countries is groundless, and that, under a system of freedom,
the distribution of the precious metals which is adapted to the
requirements of trade will spontaneously establish itself. " In
short, a Government has great reason to preserve with care its
people and its manufactures ; its money it may safely trust to
the course of human affairs without fear or jealousy."

A very important service was rendered by his treatment
of the rate of interest. He exposes the erroneous idea often
entertained that it depends on the quantity of money in a
country, and shows that the reduction of it must in general
be the result of " the increase of industry and frugality, of
arts and commerce," so that it may serve as a barometer, its
lowness being an almost infallible sign of the flourishing
condition of a people. It may be observed in passing that in
the essay devoted to this subject he brings out a principle
of human nature which economists too often overlook, " the
constant and insatiable desire of the mind for exercise and
employment," and the consequent action of ennui in prompting
to exertion.

With respect to commerce, he points to its natural founda-
tion in what has since been called " the territorial division of
labour," and proves that the prosperity of one nat.in^, instead
of being a hindrance, is a h.elp to that of its neighbours,
"Not only as a man, but as a British subject," he says, "I
pray for the flourishing commerce of Germany, Spain, Italy,
and even France itself." He condemns the " numberless bars,
obstructions, and imposts which all nations of Europe, and
none more than England, have put upon trade." Yet on the
question of protection to national industry he is not quite at

SYSTEM OF NATURAL LIBERTY. 85

the free-trade point of view, for he approves of a tax on
Geiman linen as encouraging home manufactures, and of a
tax on brandy as increasing the sale of rum and supporting
our southern colonies. Indeed it has been justly observed
that there are in him several traces of a refined mercantilism,
and that he represents a state of opinion in which the transi-
tion from the old to the new views is not yet completely
effected.

We cannot do more than refer to the essay on taxes, in
which, amongst other things, he repudiates the impdt unique
of the physiocrats, and to that on public credit, in which he
criticises the "new paradox that public encumbrances are
of themselves advantageous, independent of the necessity of
contracting them," and objects, perhaps too absolutely, to the.
modern expedient of raising the money required for national
enterprises by way of loan, and so shifting our burdens upon
the shoulders of posterity.

The characteristics of Hume, which are most important in
the history of economic investigation, are (i) his practice of
bringing economic facts into connection with all the weighty
interests of social and political life,., and (2) his tendency to
introduce the historical spirit into the study of those facts.
He admirably illustrates the mutual action of the several
branches of industry, and the influences of progress in the
arts of production and in commerce on general civilisation,
exhibits the striking contrasts of the ancient and modern
system of life (see especially the essay On the Populousness
of Ancient Nations), and considers almost every phenomenon
which comes under discussion in its relations to the con-
temporary stage of social development. It cannotjje doubted
that Hume exercised a most important influence on 4-dam
Smith, who in the Wealth of Nations1 calls him "by far the
most Illustrious philosopher and historian of the present age,"
and who esteemed his character so highly that, after a friend-
ship of many years had been terminated by Hume's decease,
be declared him to have "approached as nearly to the ideal
v. chap. i. art. 3.

86 POLITICAL ECONOMY.

of a perfectly wise and virtuous man as perhaps the nature ol
human frailty will permit."

Josiah Tucker, dean of Gloucester (d. 1799), holds a dis-
tinguished place among the immediate predecessors of Smith.
Most of his numerous productions had direct reference to
contemporary questions, and, though marked by much sagacity
and penetration, are deficient in permanent interest. In some
of these he urged the impolicy of restrictions on the trade
of Ireland, advocated a union of that country with England,
and recommended the recognition of the independence of the
United States of America. The most important of his general
economic views are those relating to international commerce.
He is an ardent supporter of free-trade doctrines, which he
bases on the principles that there is between nations no
necessary antagonism, but rather a harmony, of interests, and
that their several local advantages and different aptitudes
naturally prompt them to exchange. He had not, however,
got quite clear of mercantilism, and favoured bounties on ex-
ported manufactures and the encouragement of population by
a tax on celibacy. Dupont, and after him Blanqui, represent
Tucker as a follower of the physiocrats, but there seems to be
no ground for this opinion except his agreement with them
on the subject of the freedom of trade. Turgot translated
into French (1755), under the title of Questions Importantes
sur le Commerce, a tract by Tucker on The Expediency of a
Law for the Naturalisation of Foreign Protestants.

In 1767 was published Sir James Steuart's Inquiry into the
Principles of Political Economy. This was one of the most
unfortunate of books. It was the most complete and syste-
matic survey of the science from the point of view of moderate
mercantilism which had appeared in England. Steuart was
a man of no ordinary abilities, and had prepared himself for
his task by long and serious study. But the time for the
mercantile doctrines was past, and the system of natural
liberty was in possession of an intellectual ascendency which
foreshadowed its political triumph. Nine years later the

SYSTEM OF NATURAL LIBERTY. 87

Wealth of Nations was given to the world, a work as superior
to Steuart's in attractiveness of style as in scientific soundness.
Thus the latter was predestined to fail, and in fact never
exercised any considerable theoretic or practical influence.
Smith never quotes or mentions it; being acquainted with
Steuart, whose conversation he said was better than his book,
he probably wished to keep clear of controversy with him.1
The German economists have examined Steuart's treatise
more carefully than English writers have commonly done;
and they recognise its high merits, especially in relation to the
theory of value and the subject of population. They have
also pointed out that, in the spirit of the best recent research,
he has dwelt on the special characters which distinguish the
economies proper to different nations and different grades in

social progress..^- » -— — •**^*~*—~ --^_— •——• -^

Coming now to the great name of Adam Smith (1723-1 790),
it is of the highest importance that we should rightly under-
stand his position and justly estimate his claims. It is plainly
contrary to fact to represent him, as some have done, as the
creator of political economy. The subject of social wealth
had always in some degree, and increasingly in recent times,
engaged the attention of philosophic minds. The study had
even indisputably assumed a systematic character, and, from
being an assemblage of fragmentary disquisitions on particular
questions of national interest, had taken the form, notably
in Turgot's Reflexions^ of an organised body of doctrine. The
truth is, that Smith took up the science when it was already
considerably advanced; and it was this very circumstance
which enabled him, by the production of a classical treatise,
to render most of his predecessors obsolete. But, whilst all
the economic labours of the preceding centuries prepared the
i»ay for him, they did not anticipate his work. His appear-

1 Smith says, in a letter to Pulteney (1772) — " I have the same opinion
of Sir James Steuart's book that you have. Without once mentioning
it, I flatter myself that any false principle in it will meet with a clear
and distinct confutation in mine."

88 POLITICAL ECONOMY.

ance at an earlier stagb, or without those previous labours,
would be inconceivable ; but he built, on the foundation
which had been laid by others, much of his own that was
precious and enduring.

Even those who do not fall into the error of making Smith
the creator of the science, often separate him too broadly from
Quesnay and his followers, and represent the history of modern
Economics as consisting of the successive rise and reign of
three doctrines — the mercantile, the physiocratic, and the
Smithian. The last two are, it is true, at variance in some
even important respects. But it is evident, and Smith him-
self felt, that their agreements were much more fundamental
than their differences; and, if we regard them as historical
forces, they must be considered as working towards identical
ends. They both urged society towards the abolition of the
previously prevailing industrial policy of European Govern-
ments ; and their arguments against that policy rested essenti-
ally on the same grounds. Whilst Smith's criticism was more
searching and complete, he also analysed more correctly than
the physiocrats some classes of economic phenomena, — in par-
ticular dispelling the illusions into which they had fallen
with respect to the unproductive nature of manufactures and
commerce. Their school disappeared from the scientific field,
not merely because it met with a political check in the person
of Turgot, but because, as we have already said, the__^ea^A
of Nations absorbed into itself ajl that was valuable in their
teaching, whilst it continued more effectually the impulse
they had given to the necessary work of demolition.

The history of economic opinion in modern times, down
to the third decade of our own century, is, in fact, strictly
bipartite. _ The first stage is filled with the mercantile system,
which, as we have shown, was rather a practical policy than a
speculative doctrine, and which came into existence as the
spontaneous growth of social conditions acting on minds not
trained to scientific habits. The second stage is occupied
with the gradual rise and ultimate ascendency pf another

SYSTEM OF NATURAL LIBERTY. 89

system founded on the idea of the right of the individual to
an unimpeded sphere for tliB UJLHiuibB 6f his economic activity.
%Withtlm latter, wiilUli Is best designated as the "system of
natural liberty," we ought to associate the memory of the.
physiocrats as well as that of Smith, without, however, main-
taining their services to have been equal to his.

The teaching of political economy was in the Scottish uni-
versities associated with that of moral philosophy. Smith, as
we are told, conceived the entire subject he had to treatan
his public lectures as divisible into four heads, the first of
which was natural theology,, the second ethics, the third
jurisprudence ; whilst in the fourth " he examined those poli-
tical regulations which are founded upon expediency, and
which are calculated to increase the riches, the power, and the
prosperity of a state." The last two branches of inquiry are
regarded as forming but a single body of doctrine in the well-
known passage of the Theory of Moral Sentiments (1759) in
which the author promises to give in another discourse "an ac-
count of the general principles of law and government, and of the
different revolutions they have undergone in the different ages
and periods of society, not only in what concerns justice, but
in what concerns police, revenue, and arms, and whatever else
is the subject of law." This shows how little it was Smith's
habit to separate (except provisionally), in his conceptions
or his researches, the economic phenomena of society from
all the rest. The wrords above quoted have, indeed, been not
unjustly described as containing " an anticipation, wonderful
for his period, of general Sociology, both statical and dynami-
cal, an anticipation which becomes still more remarkable when
ve learn from his literary executors that he had formed the
plan of a connected history of the liberal sciences and elegant
arts, which must have added to the branches of social study
already enumerated a view of the intellectual progress of
society." Though these large designs were never carried out
in their integrity, as indeed at that period they could not have
been adequately realised, it has resulted from them th^t, though

&

POLITICAL ECONOMY.

economic phenomena form the special subject of the Wealth
of Nations, Smith yet incorporated into that work much that
relates to the other social aspects, incurring thereby the censure
of some of his followers, who insist with pedantic narrowness
on the strict isolation of the economic domain.

There has been much discussion on the question — What is
the scientific method followed by Smith in his great work 1
By some it is considered to have been purely deductive, a
view which Buckle has perhaps carried to the greatest ex-
treme. He asserts that in Scotland the inductive method
was unknown, that the inductive philosophy exercised no
influence on Scottish thinkers ; and, though Smith spent
some of the most important years of his youth in England,
where the inductive method was supreme, and though he was
widely read in general philosophical literature, he yet thinks
he adopted the deductive method because it was habitually
followed in Scotland, — and this though Buckle maintains
that it is the only appropriate, or even possible, method in
political economy, which surely would have been a sufficient
reason for choosing it. That the inductive spirit exercised
no influence on Scottish philosophers is certainly not true ;
as will be presently shown, Montesquieu, whose method ia
essentially inductive, was in Smith's time studied with quite
peculiar care and regarded with special veneration by Smith's
fellow-countrymen. As to Smith himself, what may justly
be said of him is that the deductive bent was certainly not
the predominant character of his mind, nor did his great
excellence lie in the " dialectic skill " which Buckle ascribes
to him. What strikes us most in his book is his wide and
keen observation of social facts, and his perpetual tendency
to dwell on these and elicit their significance, instead of
drawing conclusions from abstract principles by elaborate
chains of reasoning. It is this habit of his mind which
gives us, in reading him, so strong and abiding a sense of
being in contact with the realities of life.

That Smith does, however, largely employ the deductive

SYSTEM OF NATURAL LIBERTY. 91

method is certain ; and that method is quite legitimate when
the premises from which the deduction sets out are known
universal facts of human nature and properties of external
objects. Whether this mode of proceeding will carry us far
may indeed well be doubted; but its soundness cannot be
disputed. But there is another vicious species of deduction
which, as Cliffe Leslie has shown, seriously tainted the
philosophy of Smith, — in which the premises are not facts
ascertained by observation, but the same a priori assumptions,
half theological half metaphysical, respecting a supposed
harmonious and beneficent natural order of things which
we found in the physiocrats, and which, as we saw, were
embodied in the name of that sect. In his view, Nature has
made provision for social wellbeing by the principle of the
human constitution which prompts every man to better his
condition : the individual ajmn ™l1y of *"'« p™i™+? gni'"j Kit
in doing so is " led bv an invisible hand " to promote the
public good, wlnV.Ti was nn part, nf his intention : human
institutions, by interfering with the action of this principle
in the name of the public interest, defeat their own end ; but,
when all systems of preference or restraint are taken away,
" the obvious and simple system of natural liberty establishes
itself of its own accord." This theory is, of course, not
explicitly presented by Smith as a foundation of his econo-
mic doctrines, but it is really the secret substratum on which
they rest. Yet, whilst such latent postulates warped his
view of things, they did not entirely determine his method.
His native bent towards the study of things as they are pre-
served him from extravagances into which many of his fol-
lowers have fallen. But besides this, as Leslie has pointed
out, the influence of Montesquieu tended to counterbalance
the theoretic prepossessions produced by the doctrine of the
jus naturae. That great thinker, though he could not, at his
period, understand the historical method which is truly ap-
propriate to sociological inquiry, yet founded his conclusions
on induction. It is true, as Comte has remarked, that hii

92 POLITICAL ECONOMY.

accumulation of facts, borrowed from the most different
states of civilisation, and not subjected to philosophic criti-
cism, necessarily remained on the whole sterile, or at least
could not essentially advance the study of society much
beyond the point at which he found it. His merit, as we I
have before mentioned, lay in the recognition of the subjection 1
of all social phenomena to natural laws, not in the discover]) [
of those laws. But this limitation was overlooked by the
philosophers of the time of Smith, who were much attracted
by the system he followed of tracing social facts to the special
circumstances, physical or moral, of the communities in which
they were observed. Leslie has shown that Lord Kaimes,
Dalrymple, and Millar — contemporaries of Smith, and the
last his pupil — were influenced by Montesquieu; and he
might have added the more eminent name of Ferguson, whose
respect and admiration for the great Frenchman are expressed
in striking terms in his History of Civil Society.1 We are
even informed that Smith himself in his later years was
occupied in preparing a commentary on the Esprit des Lois?

1 "When I recollect what the President Montesquieu has written, I
am at a loss to tell why I should treat of human affairs ; but I too am
instigated by my reflections and my sentiments ; and I may utter them
more to the comprehension of ordinary capacities, because I am more
on the level of ordinary men. . . . The reader should be referred to what
has been already delivered on the subject by this profound politician and
amiable moralist " (Part I. sect. 10). Hume speaks of Montesquieu as
an "illustrious writer," who "has established ... a system of political
knowledge, which abounds in ingenious and brilliant thoughts and is not
wanting in solidity " (Principles of Morals, sect. 3, and note).

2 The following paragraph appeared in the Moniteur Universd of
March n, 1790 :— " On pretend que le cdlebre M. Smith, connu si
avantageusement par son traite* des causes de la richesse dea nations,
prepare et va mettre h, 1'impression un examen critique de 1'Esprit des
Lois ; c'est le re'sultat de plusieurs ann^es de meditation, et Ton sait
assez ce qu'on a droit d'attemlre d'une tete comme celle de M. Smith.
Ce livre fera e*poque dans 1'histoire de la politique et de la philosophic ,
tel est du moins le jugement qu'en portent des gens instruits qui en
connaissent des fragments dont ils ne parleut qu'avec on enthousiasme
du plus heureux augure,"

SYSTEM OF NATURAL LIBERTY.

He was thus affected by two different and incongruous systems
of thought, — one setting out from an imaginary code of nature
intended for the benefit of man, and leading to an optimistic
view of the economic constitution founded on enlightened self-
interest; the other following inductive processes, and seeking
to explain the several states in which human societies are found
existing, as results of circumstances or institutions which have
been in actual operation. And we find accordingly in his great
work a combination of these two methods — inductive inquiry
on the one hand, and, on the other, a priori speculation founded f\/J&
on the "Nature" hypothesis. The latter vicious proceeding
has in some of his followers been greatly aggravated, while the
countervailing spirit of inductive investigation has fallen into the
background, and indeed the necessity or utility of any such
investigation in the economic field has been sometimes altogether
denied.

Some have represented Smith's work as of so loose a texture
and so defective in arrangement that it may be justly described
as consisting of a series of monographs. But this is certainly
an exaggeration. The book, it is true, is not framed on a
rigid mould, nor is there any parade of systematic divisions
and subdivisions; and this doubtless recommended it to men
of the world and of business, for whose instruction it was, at
least primarily, intended. But it has the real and pervading
unity which results from a set of principle .find n mmla fff-
thinking identical throughout and^jjbie general absence of such
contradictions as would arise from an imperfect digestion of the
subject.

QjSmith sets out from the thought that the annual labour of
a nation is the source from which it derives its supply of the
necessaries and conveniences of life.") He does not of course
contemplate labour as the only factor in production; but it
has been supposed that by emphasising it at the outset he at
once strikes the note of difference between himself on the one
hand and both the mercantilists and the physiocrats on the
other. The improvement in the productiveness of labour

94 POLITICAL ECONOMY.

depends largely on its_ jliyjsujjj^-and he proceeds accordingly
to give his unrivalled exposition of that principle, of the
grounds on which it rests, and of its greater applicability to
manufactures than to agriculture, in consequence of which the
latter relatively lags behind in the course of economic develop-

/ ment.1 The origin of the division of labour he finds in the
propensity 01 human nature " to truck, barter, or exchange
one thing for another." He shows that a certain accumulation
of capital is a condition precedent of this division, and that
the degree to which it can be carried is dependent on the
extent of the market. When the division of labour has been
established, each member of the society must have recourse
to the others for the supply of most of his wants ; a medium
of exchange is thus found to be necessary, and money comes
into use. The exchange of goods against each other or againsfT\ //'

, money gives rise to the notion of value, ^his word has two
meanings — +.KQJ-. nf ^.ilify and that of purchasing; power ; the
one may be called value in use, the other value in exchange.
Merely mentioning the former, Smith goes on to study the
latter. What, he asks, is the measure of value ? what regu-
lates the amount of one thing which will be given for another 1
"^Labour," Smith answers, " isU&e^real jmeasure^of^h^jex-
changeable value of all commodities." "Equal quantities
of labour, at all times and places, are of equal value to the
labourer."2 "Labour alone, therefore, never varying in its
own value, is alone the ultimate and real standard by which
the value of all commodities can at all times and places be \
estimated and compared. It is their real price ; money is /

. their nominal price only." Money, however, is in men's

\ictual transactions the measure of value, as well as the vehicle *

1 Smith takes no account in this place of the evils which may arise
from a highly developed division of labour. But see Bk. v. chap. i.

2 This sentence, which on close examination will be found to have no
definite intelligible sense, affords a good example of the way in which
metaphysical modes of thought obscure economic ideas. What is a
"quantity of labour," the kind of labour being undetermined? And
what is meant by the phrase " of equal value " I

SYSTEM OF NATURAL LIBERTY. 95

of exchange ; and the precious metals are best suited for this
function, as varying little in their own value for periods of
moderate length ; for distant times, corn is a better standard
of comparison. In relation to the earliest social stage, we
need consider nothing but the amount of labour employed in
the production of an article as determining its exchange value }
but in more advanced periods price is complex, and consists
in the most general case of three elements — wages, profit, and
rent. Wages are the reward of labour. Profit arises as soon
as, .stock, being accumulated in the hands of one person, is
employed by him in setting others to work, and supplying
them with materials and subsistence, in order to make a gain
by what they produce. Kant arises as soon as the land of a
country has all become private property ; " the landlords, like
all other men, love to reap where they never sowed, and de-
mand a rent even for its natural produce." In every improved
society, then, these three elements enter more or less into the
price of the far greater part of commodities. There is in every
society or neighbourhood an ordinary or average rate of wages
and profit in every different employment of labour and stock,
regulated by principles to be explained hereafter, as also an
ordinary or average rate of rent. These may be called the
natural rates at the time when and the place where they pre-
vail ; and the natural price of a commodity is what is sufficient
to pay for the rent of the land,1 the wages of the labour, and
the profit of the stock necessary for bringing the commodity^
to market. The market price may rise above or fall below T
the amount so fixed, being determined by the proportion (
between the quantity brought to market and the demand of f
those who are willing to pay the natural price. Towards the /*^
natural price as a centre the market price, regulated by com-\
petition, constantly gravitates. Some commodities, however, J
are subject to a monopoly of production, whether from the
peculiarities of a locality or from legal privilege : their price

1 Smith's expressions on this point are lax, as will be seen when w«
oome to examine the (so-called) Ricardian Theory of Rent.

96 POLITICAL ECONOMY.

is always the highest that can be got ; the natural price ol
other commodities is the lowest which can he taken for any
length of time together. The three component parts or factors
of price vary with the circumstances of the society. The rate
of wages is determined by a " dispute " or struggle of opposita
interests between the employer and the workman. A minimum
rate is fixed by the condition that they must be at least suffi-
cient to enable a man and his wife to maintain themselves
and, in general, bring up a family. The excess above this
will depend on the circumstances of the country, and the con-
sequent demand for labour, — wages being high when national
wealth is increasing, low when it is declining. The same
circumstances determine the variation of profits, but in an
opposite direction ; the increase of stock, which raises wages,
tending to lower profit through the mutual competition of
capitalists. " The whole of the advantages and disadvantages
of the different employments of labour and stock must, in the
same neighbourhood, be either perfectly equal or continually
tending to equality ; " if one had greatly the advantage over
the others, people would crowd into it, and the level would
Boon be restored. Yet pecuniary wages and profits are very
different in different employments, — either from certain cir-
cumstances affecting the employments, which recommend or
disparage them in men's notions, or from national policy,
"which nowhere leaves things at perfect liberty." Here
follows Smith's admirable exposition of the causes which pro-
duce the inequalities in wages and profits just referred to, a
passage affording ample evidence of his habits of nice observa-
tion of the less obvious traits in human nature, and also of
the operation both of these and of social institutions on eco-
nomic facts. The rent of land comes next tp be considered,

ice. (. R

as the last of the three elements of price. . Rent ia a
poly price, equal, not to what the landlord could afford to take,
but to what the farmer can afford to give. " Such parts only
of the produce of land can commonly be brought to market,
of which the ordinary price is sufficient to replace the stock

SYSTEM OF NATURAL LIBERTY. 97

which must be employed in bringing them thither, togethei
with the ordinary profits. If the ordinary price is more tha~
this, the surplus part will naturally go to the rent of the land.
If it is not more, though the commodity may he brought to
market, it can afford no rent to the landlord. Whether the
price is or is not more depends on the demand." "Rent,
therefore, enters into the price of commodities in a different
way from wages and profits. High or low wages and profit
are the causes of high or low price ; high or low rent is the
effect of it." ,/

Bent, wages, and profits, as they are the elements of price,
are also the constituents of income; and the three great
orders of every civilised society, from whose revenues that of
every other order is ultimately derived, are the landlords, the
labourers, and the capitalists. The relation of the interests
of these three classes to those of society at large is different.
The interest of the landlord always coincides with the general
interest : whatever promotes or obstructs the one has the same
effect on the other. So also does that of the labourer : when
the wealth of the nation is progressive, his wages are high ;
they are low when it is stationary or retrogressive. " The
interest of the third order has not the same connection with
the general interest of the society as that of the other two ;
... it is always in some respects different from and opposite
to that of the public."

The subject of the second book is " the nature, accumulation,
and improvement of stock." A man's whole stock consists
of two portions — that which is reserved for his immediate
consumption, 'and that which is employed so as to yield a
revenue to its owner. This latter, which is his " capital," is
divisible into the two__cjasses of " fixed" and " circulating."
The first is such as yields a profit without passing into other
hands. The second consists of such goods, raised^ manufac-
tured, or purchased, as are sold for a profit and replaced by
other goods ; this sort of capital is therefore constantly going
from and returning to the hands of its owner. The whole

98 POLITICAL ECONOMY.

capital of a society falls under the same two heads. Its fixed
capital consists chiefly of (i) machines, (2) buildings which are
the means of procuring a revenue, (3) agricultural improve-
ments, and (4) the acquired and useful abilities of all members
of the society (since sometimes known as " personal capital ").
Its circulating capital is also composed of four parts — (i)
money, (2) provisions in the hands of the dealers, (3) materials,
and (4) completed work in the hands of the manufacturer or
merchant. Next comes the distinction of the gross national
revenue from the net, — the first being the whole produce of
the land and labour of a country, the second what remains
after deducting the expense of maintaining the fixed capital
of the country and that part of its circulating capital which
consists of money. Money, " the great wheel of circulation,"
is altogether different from the goods which are circulated by
means of it \ it is a costly instrument by means of which all
that each individual receives is distributed to him ; and the
expenditure required, first to provide it, and afterwards to
maintain it, is a deduction from the net revenue of the society.
In development of this consideration, Smith goes on to explain
the gain to the community arising from the substitution of
paper money for that composed of the precious metals ; and
here occurs the remarkable illustration in which the use of gold
and silver money is compared to a highway on the ground,
that of paper money to a waggon-way through the air. In
proceeding to consider the accumulation of capital, he is led to
the distinction between productive and unproductive J.abour,
— the former being that which is^. fixed or realised in a
particular object or vendible article^* the latter that which is
not so realised. The former is exemplified in the labour of
the manufacturing workman, the latter in that of the menial
servant. A broad line of demarcation is thus drawn between
the labour which results in commodities or increased value
of commodities, and that which does no more than render
services : the former is productive, the latter unproductive*
" Productive " is by no means equivalent to " useful : " the

SYSTEM OF NATURAL LIBERTY. 9$

labours of the magistrate, the soldier, the churchman, lawyer,
and physician are, in Smith's sense, unproductive. Productive
labourers alone are employed out of capital ; unproductive
labourers, as well as those who do not labour ,^ti a,11j TTQ pi1!
maintained by revenue. In advancing industrial communities,
the portion of annual produce set apart as capital bears an
increasing proportion to that which is immediately destined to
constitute a revenue, either as rent or as profit. /Parsimony
is the source of the increase of capital ; by augmenting the
fund devoted to the maintenance of productive hands, it puts
in motion an additional quantity of industry, which adds to
the value of the annual produce. \What is annually saved is
as regularly consumed as what is spent, but by a different set
of persons, by productive labourers instead of idlers or unpro-
ductive labourers ; and the former reproduce with a profit
the value of their consumption. The prodigal^ encroaching
On his capital, diminishes, as far as in him lies, the amount oT
Deductive labour, and so the wealth of the country ; nor is
this result affected by his expenditure being on home-made,
as distinct from foreign, commodities. Every prodigal, there-
fore, is a public enemy ; every frugal man a public benefactor.
The only mode of increasing the annual produce of the land
and labour is to increase either the number of productive
labourers or the productive powers of those labourers. Either
process will in general require additional capital, the former to
maintain the new labourers, the latter to provide improved
machinery or to enable the employer ftrintroduce a more
complete division of labour. In what are commonly called
loans of money, it is not really the money, but the money's
worth, that the borrower wants ; and the lender really assigns
to him the right to a certain portion of the annual produce of
the land and labour of the country. As the general capital of
a country increases, so also does the particular portion of it
from which the possessors wish to derive a revenue without
being at the trouble of employing it themselves ; and, as the
quantity of stock thus available for loans is augmented, the

ioo POLITICAL ECONOMY.

interest diminishes, not merely " from the general causes which
make the market price of things commonly diminish as theii
quantity increases," hut because, with the increase of capital,
" it becomes gradually more and more difficult to find within
the country a profitable method of employing any new capital,"
— whence arises a competition between different capitals, and
a lowering of profits, which must diminish the price which
can be paid for the use of capital, or in other words the rate
of interest. It was formerly wrongly supposed, and even Locke
and Montesquieu did not escape this error, that the fall in the
value of the precious metals consequent on the discovery of
the American mines was the real cause of the permanent lower-
ing of the rate of interest in Europe. But this view, already
refuted by Hume, is easily seen to be erroneous. " In some
countries the interest of money has been prohibited by law.
But, as something can everywhere be made by the use of
money, something ought everywhere to be paid for the use of
it," and will in fact be paid for it ; and the prohibition will
only heighten the evil of usury by increasing the risk to the
lender. The legal rate should be a very little above the lowest
market rate ; sober people will then be preferred as borrowers
to prodigals and projectors, who at a higher legal rate would
have an advantage over them, being alone willing to offer that
higher rate.1

As to the different employments of capital, the quantity of
productive labour put in motion by an equal amount varies
extremely according as that amount is employed — (i) in the
improvement of lands, mines, or fisheries, (2) in manufactures,
(3) in wholesale or (4) retail trade. In agriculture " Nature
labours along with man," and not only the capital cf the
farmer is reproduced with his profits, but also the rent of the
landlord. It is therefore the employment of a given capital
which is most advantageous to society. Next in order come
manufactures; then wholesale trade — first the home trade,

1 See p. no, 011 Bent ham.

SYSTEM OF NATURAL LIBERTY. 101

secondly the foreign trade of consumption, last the carrying
trade. All these employments of capital, however, are not
only advantageous, but necessary, and will introduce them-
selves in the due degree, if they are left to the spontaneous
action of individual enterprise.

These first two books contain Smith's general economic
scheme; and we have stated it as fully as was consistent
with the necessary brevity, because from this formulation of
doctrine the English classical school set out, and round it the
discussions of more recent times in different countries have
in a great measure revolved. Some of the criticisms of his
successors and their modifications of his doctrines will come
under our notice as we proceed.

The critical philosophers of the eighteenth century were
often destitute of the historical spirit, which was no part of the
endowment needed for their principal social office. But some
of the most eminent of them, especially in Scotland, showed a
marked capacity and predilection for historical studies. Smith
was amongst the latter ; Knies and others justly remark on
the masterly sketches of this kind which occur in the Wealth
of Nations. The longest and most elaborate of these occupies
the third book ; it is an account of t.ha m^rpft ^lowfi^ ^y tKft
nations of modern Europe in the successive development of
the several forms of industry. It affords a curious example
of the effect of doctrinal prepossessions in obscuring the
results of historical inquiry. Whilst he correctly describes
the European movement of industry, and explains it as aris-
ing out of adequate social causes, he yet, in accordance with
the absolute principles which tainted his philosophy, protests
against it as involving an entire inversion of the "natural
order of things." First agriculture, then manufactures, lastly
foreign commerce; any other order than this he considers
"unnatural and retrograde." Hume, a more purely positive
thinker, simply sees the facts, accepts them, and classes them
under a general law. " It is a violent method," he says, " and
in most cases impracticable, to oblige the labourer to toil in

loa POLITICAL ECONOMY.

order to raise from the land more than what subsists himself
and family. Furnish him with manufactures and commodities,
and he will do it of himself." " If we consult history, we
shall find that, in most nations, foreign trade has preceded any
refinement in home manufactures, and given birth to domestic
luxury."

The fourth book is principally devoted to the elaborate
and exhaustive polemic against the mercantile system which
finally drove it from the field of science, and has exercised a
powerful influence on economic legislation. When protection!
is now advocated, it is commonly on different grounds from]
those which were in current use before the time of Smith.!
He believed that to look for the restoration of freedom of
foreign trade in Great Britain would have been " as absurd
as to expect that an Oceana or Utopia should be established
in it ; " yet, mainly in consequence of his labours, that object
has been completely attained; and it has lately been said
with justice that free trade might have been more generally
accepted by other nations if the patient reasoning of Smith
had not been replaced by dogmatism. His teaching on the
subject is not altogether unqualified ; but, on the whole,
with respect to exchanges of every kind, where economic
motives alone enter, his voice is in favour of freedom. He
has regard, however, to political as well as economic interests,
and on the ground that " defence is of much more importance
than opulence," pronounces the Navigation Act to have been
" perhaps the wisest of all the commercial regulations of
England." Whilst objecting to the prevention of the export
of wool, he proposes a tax on that export as somewhat less
injurious to the interest of growers than the prohibition,
whilst it would " afford a sufficient advantage " to the domestic
over the foreign manufacturer. This is, perhaps, his most
marked deviation from the rigour of principle ; it was doubt-
less a concession to popular opinion with a view to an attain-
able practical improvement. The wisdom of retaliation in
order to procure the repeal of high duties or prohibitions

SYSTEM OF NATURAL LIBERTY. 103

imposed by foreign Governments depends, he says, altogether
on the likelihood of its success in effecting the object aimed
at, but he does not conceal his contempt for the practice of
such expedients. The restoration of freedom in any manu-
facture, when it has grown to considerable dimensions by
means of high duties, should, he thinks, from motives of
humanity, be brought about only by degrees and with cir-
cumspection, — though the amount of evil which would be
caused by the immediate abolition of the duties is, in his
opinion, commonly exaggerated. The case in which J. S.
Mill would tolerate protection — that, namely, in which an in-
dustry well adapted to a country is kept down by the acquired
ascendency of foreign producers — is referred to by Smith ;
but he is opposed to the admission of this exception for
reasons which do not appear to be conclusive.1 He is perhaps
scarcely consistent in approving the concession of tempo-
rary monopolies to joint-stock companies undertaking risky
enterprises "of which the public is afterwards to reap the
benefit."2

He is less absolute in his doctrine of Governmental non-
interference when he comes to consider in his fifth book
the " gx.fleuaB8.of *-hft finYflrqisn ft? -tfr

recognises as coming within the functions of the state the
erection and maintenance of those public institutions and
public works which, though advantageous to the society,
could not repay, and therefore must not be thrown upon,

1 It must, however, always be borne in mind that the adoption by a state
of this sort of protection is liable to three practical dangers : — ( I ) of en-
couragement being procured through political influences for industries
which could never have an independent healthy life in the country ; (2) of
such encouragement being continued beyond the term during which it
might be usefully given ; (3) of a retaliatory spirit of exclusion being
provoked in other communities.

2 Professor Bastable calls the author's attention to the interesting
fact that the proposal of an export duty on wool and the justification
ef a temporary monopoly to joint-stock companies both appear for the
first time in the third edition (1784) .

T04 POLITICAL ECONOMY.

individuals or small groups of individuals. He remarks in a
just historical spirit that the performance of these functions
requires very different degrees of expense in the different
periods of society. Besides the institutions and works in-
tended for public defence and the administration of justice^
and those required for facilitating the commerce of the society,
he considers those necessary for promoting the instruction oi
the people. He thinks the public at large may with propriety
not only facilitate and encourage, but even impose upon
almost the whole body of the people, the acquisition in youth
of the most essential elements of education. He suggests
as the mode of enforcing this obligation the requirement
of submission to a test examination " before any one could
obtain the freedom in any corporation, or be allowed to set
up a trade in any village or town corporate." Similarly, he
is of opinion that some probation, even in the higher and
more difficult sciences, might be enforced as a condition of
exercising any liberal profession, or becoming a candidate for
any honourable office. The expense of the institutions for
religious instruction as well as for general education, he holds,
may without injustice be defrayed out of the funds of the whole
society, though he would apparently prefer that it should be
met by the voluntary contributions of those who think they
have occasion for such education or instruction. There is
much that is sound, as well as interesting and suggestive, in
this fifth book, in which he shows a political instinct and a
breadth of view by which he is favourably contrasted with the
Manchester school. But, if we may say so without disrespect
to so great a man, there are traces in it of what is novr
called Philistinism — a low view of the ends of art and poetry
— which arose perhaps in part from personal defect; and a
certain deadness to the high aims and perennial importance of re-
ligion, which was no doubt chiefly due to the influences of an age
when the critical spirit was doing an indispensable work, in the

SYSTEM OF NATURAL LIBERTY. 105

performance of which the transitory was apt to be confounded
with the permanent.

For the sake of considering as a whole Smith's view of the
functions of government, we have postponed noticing his treat-
ment of the physiocratic system, which occupies a part of his
fourth book. He had formed the acquaintance of Quesnay,
Turgot, and other members of their group during his sojourn
in France in 1765, and would, as he told Dugald Stewart, had
the patriarch of the school lived long enough, have dedicated
to him the Wealth of Nations. He declares that, with all its
imperfections, the system of Quesnay is " perhaps the nearest
approximation to the truth that had yet appeared on the sub-
ject of political economy." Yet he seems not to be adequately
conscious of the degree of coincidence between his own doc-
trines and those of the physiocrats. Dupont de Nemours
complained that he did not do Quesnay the justice of recognis-
ing him as his spiritual father. It is, however, alleged, on the
other side, that already in 1753 Smith had been teaching as
professor a body of economic doctrine the same in its broad
features with that contained in his great work. This is indeed
said by Stewart ; and, though he gives no evidence of it, it is
possibly quite true ; if so, Smith's doctrinal descent must be
traced rather from Hume than from the French school. JDje
principal error of this school, that, namely, of representing
agricultural labour as alone productive, he refutes in the fourth
book, though in a manner which has not always been con-
sidered effective. Traces of the influence of their mistaken
view appear to remain in his own work, as, for example, his
assertion that in agriculture nature labours along with man,
whilst in manufactures nature does nothing, man does all ; and
his distinction between productive and unproductive labour,
which was doubtless suggested by their use of those epithets,
and which is scarcely consistent with his recognition of
what is now called " personal capital." To the same source
M'Culloch and others refer the origin of Smith's view, which
they represent as an obvious error, that "individual advantage

io6 POLITICAL ECONOMY.

is not always a true test of the public advantageousness of dif
ferent employments." But that view is really quite correct,
as Professor Nicholson has clearly shown.1 That the form
taken by the use of capital, profits being given, Is not indif-
ferent to the working class as a whole even Kicardo admitted j
and Cairnes, as we shall see, built on this consideration some
of the most far-reaching conclusions in his Leading Principles.

On Smith's theory of taxation in his fifth book it is not
necessary for us to dwell. The well-known canons which
he lays down as prescribing the essentials of a good system
have been generally accepted. They have lately been severely
criticised by Professor Walker — of whose objections, however,
there is only one which appears to be well founded. Smith
seems to favour the view that the contribution of the indi-
vidual to public expenses may be regarded as payment for
the services rendered to him by the state, and ought to be
proportional to the extent of those services. If he held this
opinion, which some of his expressions imply, he was certainly
so far wrong in principle.

We shall not be held to anticipate unduly if we remark
here on the way in which opinion, revolted by the aberrations
of some of Smith's successors, has tended to turn from the
disciples to the master. A strong sense of his compara-
tive freedom from the vicious tendencies of Ricardo and his
followers has recently prompted the suggestion that we ought
now to recur to Smith, and take up once more from him the
line of the economical succession. But notwithstanding his
indisputable superiority, and whilst fully recognising the great
services rendered by his immortal work, we must not forget
that, as has been already said, that work was, on the whole,
a product, though an exceptionally eminent one, of the negative
philosophy of the i8th century, resting largely in its ultimate
foundation on metaphysical bases. The mind of Smith was
mainly occupied with the work of criticism so urgent in hia

1 In the Introductory Etsay to his edition of the Wealth of Nationr.

SYSTEM OF NATURAL LIBERTY. 107

time; his principal task was to discredit and overthrow the
S economic system then prevalent, and to demonstrate the
uV^v ra(iical unfitness of the existing European Governments to
^direct the industrial movement. This office of his fell in
with, and formed a part of, the general work of demolition
carried on by the thinkers who gave to his period its character-
istic tone. It is to his honour that, besides this destructive
operation, he contributed valuable elements to the preparation
of an organic system of thought and of life. In his special
domain he has not merely extinguished many errors and
prejudices, and cleared the ground for truth, but has left us
a permanent possession in the judicious analyses of economic
facts and ideas, the wise practical suggestions, and the luminous
indications of all kinds with which his work abounds. Be-
longing to the best philosophical school of his period, that
with which the names of Hume and Diderot are associated,
he tended strongly towards the positive point of view. But
it was not possible for him to attain it; and the final and
fully normal treatment of the economic life of societies must
be constituted on other and more lasting foundations than
those which underlie his imposing construction.

It has been well said that of philosophic doctrines the saying
" By their fruits ye shall know them " is eminently true. And
it cannot be doubted that the germs of the vicious methods
and false or exaggerated theories of Smith's successors are to
be found in his own work, though his good sense and practical
bent prevented his following out his principles to their extreme
consequences. The objections of Hildebrand and others to
the entire historical development of doctrine which the Germans
designate as " Smithianismus " are regarded by these critics
as applicable, not merely to his school as a whole, but, though
in a less degree, to himself. The following are the most
important of these objections. It is said — (i.) Smith's con-
ception of the social economy is essentially individualistic.
In this he falls in with the general character of the negative
philosophy of his age. That philosophy, in its most typical

io8 POLITICAL ECONOMY.

forms, even denied the natural existence of the disinterested
affections, and explained the altruistic feelings as secondary
results of self-love. Smith, however, like Hume, rejected
these extreme views ; and hence it has been held that in tho
Wealth of Nations he consciously, though tacitly, abstracted
from the benevolent principles in human nature, and as a
logical artifice supposed an " economic man " actuated by purely
selfish motives. However this may be, he certainly places
himself habitually at the point of view of the individual, whom
he treats as a purely egoistic force, working uniformly in the
direction of private gain, without regard to the good of others
or of the community at large. (2.) He justifies this personal
attitude by its consequences, presenting the optimistic view
that the good of the community is best attained through
the free play of individual cupidities, provided only that the
law prevents the interference of one member of the society
with the self-seeking action of another. He assumes with
the negative school at large — though he has passages which
are not in harmony with these propositions — that every one
knows his true interest and will pursue it, and that the
economic advantage of the individual coincides with that of
the society. To this last conclusion he is secretly led, as we
have seen, by a priori theological ideas, and also by meta-
physical conceptions of a supposed system of nature, natural
right, and natural liberty. £"(3.) By this reduction of almost
every question to one of individual gain, he is led to a too exclusive
consideration of exchange value as distinct from wealth in
the proper sense. This, whilst lending a mechanical facility
in arriving at conclusions, gives a superficial character to
economic investigation, divorcing it from the physical and
biological sciences, excluding the question of real social
utility, leaving no room for a criticism of production, and
leading to a denial, like J. S. Mill's, of any economic doctrine
dealing with consumption — in other words, with the use of
wealth. (4.) In condemning the existing industrial policy,
be tends too much towards a glorification of non-government

SYSTEM OF NATURAL LIBERTY. io*

and a repudiation of all social intervention for the regulation
of economic life. (5.) He does not keep in view the moral
destination of our race, nor regard wealth as a means to the
higher ends of life, and thus incurs, not altogether unjustly,
the charge of materialism, in the wider sense of that word.
Lastly, (6.) his whole system is too absolute in its character;
it does not sufficiently recognise the fact that, in the language
of Hildehrand, man, as a member of society, is a child of
civilisation and a product of history, and that account ought
to be taken of the different stages of social development as
implying altered economic conditions and calling for altered
economic action, or even involving a modification of the actor.
Perhaps in all the respects here enumerated, certainly in some
of them, and notably in the last, Smith is less open to criticism
than most of the later English economists ; but it must, we
think, be admitted that to the general principles which lie at
the basis of his scheme the ultimate growth of these several
vicious tendencies is traceable.

Great expectations had been entertained respecting Smith's
work by competent judges before its publication, as is shown
by the language of Ferguson on the subject in his History of
Civil Society.1 That its merits received prompt recognition
is proved by the fact of six editions having been called for
within the fifteen years after its apjjearance.2 From the year

1 " The public will probably soon be furnished with a theory of national
oeconomy, equal to what has ever appeared on any subject of science
whatever " (Part IIL sect. 4).

2 Five editions of the Wealth of Nations appeared during the life of
the author : — the first in 1776, the second in 1779, the third in 1784, the
fourth in 1786, and the fifth in 1789. After the third edition Smith made
no change in the text. The principal editions containing matter added
by other economists are those by William Playfair, with notes, 1805 ; by
David Buchanan, with notes, 1814; by J. R. M'Culloch, with life of the
author, introductory discourse, notes, and supplemental dissertations,
1828 (also, with numerous additions, 1839; since reprinted several times
with further additions) ; by the author of England and America (Ed-
ward Gibbon Wakefield), with a commentary, which, however, is not
, continued beyond the second book, 1835-9 > by James E. Thorold Rogers,

/io POLITICAL ECONOMY.

1783 it was more and more quoted in Parliament. Pitt waa
greatly impressed by its reasonings ; Smith is reported to have
said that that Minister understood the book as well as himself.
Pulteney said in 1797 that Smith would persuade the then
living generation and would govern the next.1

Smith's earliest critics were Bentham and Lauderdale, who,
though in general agreement with him, differed on special
points. Jeremy Bentham was author of a short treatise en-
titled A Manual of Political Economy and various eco-
nomic monographs, the most celebrated of which was his
Defence of Usury (1787). This contained (Letter xiii.) an
elaborate criticism of a passage in the Wealth of Nations,
already cited, in which Smith had approved of a legal maxi-
mum rate of interest fixed but a very little above the lowest
market rate, as tending to throw the capital of the country
into the hands of sober persons, as opposed to " prodigals and
projectors." Smith is said to have admitted that Bentham
had made out his case. He certainly argues it with great
ability ; 2 and the true doctrine no doubt is that, in a developed
industrial society, it is expedient to let the rate be fixed by
contract between the lender and the borrower, the law inter-
fering only in case of fraud.

Bentham's main significance does not belong to the economic
field. But, on the one hand, what is known as Benthamism
was undoubtedly, as Comte has said,3 a derivative from poli-
tical economy, and in particular from the system of natural

Professor of Political Economy at Oxford, with biographical preface and
a careful verification of all Smith's quotations and references, 1869 (ad
ed., 1880) ; and by J. S. Nicholson, professor at Edinburgh, with an In-
troductory Essay, and notes referring to sources of further information
on the various topics handled in the text, 1884. There is a careful
Abridgment by W. P. Emerton (zd ed., 1881), founded on the earlier
Analysis of Jeremiah Joyce fed ed., 1821).

1 Par 1. Hist., vol. xxxiii. p. 778.

2 It must be remembered, however, that the same doctrine had been
supported with no less ability as early as 1769 by Turgot in his Me" moire
sur les prets d' argent.

8 Lettres d'A. Comte a J. S. Mill, p. 4.

SYSTEM OF NATURAL LIBERTY. in

liberty ; and, on the other, it promoted the temporary ascen-
dency of that system by extending to the whole of social and
moral theory the use of the principle of individual interest
and the method of deduction from that interest. This
alliance between political economy and the scheme of Bentham
is seen in the personal group of thinkers which formed itself
round him, — thinkers most inaptly characterised by J. S. Mill
as " profound," but certainly possessed of much acuteness and
logical power, and tending, though vaguely, towards a positive
sociology, which, from their want of genuinely scientific culture
and their absolute modes of thought, they were incapable of
founding, y

Lord Lauderdale, in his Inquiry into the Nature and Origin
of Public Wealth (1804), a book still worth reading, pointed
out curtain real weaknesses in Smith's account of value and
the measure of value, and of the productivity of labour, and
threw additional light on several subjects, such as the true
mode of estimating the national income, and the reaction of
the distribution of wealth on its production.

Smith stood just at the beginning of a great industrial
revolution. The world of production and commerce in which
he lived was still, as Cliffe Leslie has said, a "very early"
and comparatively narrow one; "the only steam-engine he
refers to is Newcomen's," and the cotton trade is mentioned
by him only once, and that incidentally. " Between the years
1760 and 1770," says Mr. Marshall, "Roebuck began to smelt
iron by coal, Brindley connected the rising seats of manufac-
tures with the sea by canals, Wedgwood discovered the art of
making earthenware cheaply and well, Hargreaves invented
the spinning- jenny, Arkwright utilised Wyatt's and High's
inventions for spinning by rollers and applied water-power to
move them, and Watt invented the condensing steam-engine.
Crompton's mule and Cartwright's power-loom came shortly
after." Out of this rapid evolution followed a vast expan-
sion of industry, but also many deplorable results, which, had
Smith been able to foresee them, might have made him a IBM

na POLITICAL ECONOMY.

enthusiastic believer in the benefits to be wrought by the
mere liberation of effort, and a less vehement denouncer of
old institutions which in their day had given a partial pro-
tection to labour. Alongside of these evils of the new indus-
trial system, Socialism appeared as the alike inevitable and
indispensable expression of the protest of the working classes
and the aspiration after a better order of things ; and what we
now call "the social question," that inexorable problem of
modern life, rose into the place which it has ever since main-
tained. This question was first effectually brought before the
English mind by Thomas Eobert Malthus (1766-1834), not,
however, under the impulse of revolutionary sympathies, but
in the interests of a conservative policy.

The first edition of the work which achieved this result
appeared anonymously in 1798 under the title — An Essay
on the Principle of Population, as it affects the future im-
provement of Society, with remarks on the speculations oj
Mr. Godwin, M. Condorcet, and other writers. This book arose
out of certain private controversies of its author with his
father, Daniel Malthus, who had been a friend of Rousseau,
and was an ardent believer in the doctrine of human progress
as preached by Condorcet and other French thinkers and
by their English disciples. The most distinguished of the
latter was William Godwin, whose inquiry concerning Political
Justice had been published in 1793. The views put forward
in that work had been restated by its author in the Enquirer
(1797), and it was on the essay in this volume entitled
" Avarice and Profusion " that the discussion between the
father and the son arose, " the general question of the future
improvement of society " being thus raised between them —
the elder Malthus defending the doctrines of Godwin, and the
younger assailing them. The latter " sat down with an in-
tention of merely stating his thoughts on paper in a clearei
manner than he thought he could do in conversation," and
the Essay on population was the result

The social scheme of Godwin was founded on the idea that

SYSTEM OF NATURAL LIBERTY. 113

the evils of society arise from the vices of human institutions.
There is more than enough of wealth available for all, but it
is not equally shared : one has too much, another has little or
nothing. Let this wealth, as well as the labour of producing
it, be equally divided ; then every one will by moderate
exertion obtain sufficient for plain living ; there will be abun-
dant leisure, which will be spent in intellectual and moral
self-improvement; reason will determine human actions;,
government and every kind of force will be unnecessary ; and,
in time, by the peaceful influence of truth, perfection and
happiness will be established on earth. To these glowing
anticipations Malthus opposes the facts of the necessity of
food and the tendency of mankind to increase up to the limit
of the available supply of it. In a state of universal physical
wellbeing, this tendency, which in real life is held in check
by the difficulty of procuring a subsistence, would operate
without restraint. Scarcity would follow the increase of num-
bers ; the leisure would soon cease to exist ; the old struggle
for life would recommence ; and inequality would reign once
more. If Godwin's ideal system, therefore, could be estab-
lished, the single force of the principle of population, Malthus
maintained, would suffice to break it down.

It will be seen that the essay was written with a polemical
object; it was an occasional pamphlet directed against the
Utopias of the day, not at all a systematic treatise on popula-
tion suggested by a purely scientific interest. As a polemic, it
was decidedly successful ; it was no difficult task to dispose
of the scheme of equality propounded by Godwin. Already,
in 1761, Dr. Kobert Wallace had published a work (which
was amongst those used by Malthus in the composition of his
essay) entitled Various Prospects of Mankind, Nature, and
Providence, in which, after speaking of a community of goods as
a remedy for the ills of society, he confessed that he saw one
fatal objection to such a social organisation, namely, "the excessive
population that would ensue." With Condorcet's extrava-
gances, too, Malthus easily dealt. That eminent man, amidst

II4 POLITICAL ECONOMY.

the tempest of the French Revolution, had written, whilst in
hiding from his enemies, his Esquisse d'un tableau historique
de Fesprit humain. The general conception of this book
makes its appearance an epoch in the history of the rise of
sociology. In it, if we except some partial sketches by Turgot,1
is for the first time explained the idea of a theory of social
dynamics founded on history ; and its author is on this ground
recognised by Comte as his principal immediate predecessor,
But in the execution of his great project Condorcet failed.
His negative metaphysics prevent his justly appreciating the
past, and he indulges, at the close of his work, in vague
hypotheses respecting the perfectibility of our race, and in
irrational expectations of an indefinite extension of the dura-
tion of human life. Malthus seems to have little sense of the
nobleness of Condorcet's attitude, and no appreciation of the
grandeur of his leading idea. But of his chimerical hopes he
is able to make short work; his good sense, if somewhat
limited and prosaic, is at least effectual in detecting and
exposing Utopias.

The project of a formal and detailed treatise on population
was an after-thought of Malthus. The essay in which he had
studied a hypothetic future led him to examine the effects
of the principle he had put forward on the past and present
state of society ; and he undertook an historical examination
of these effects, and sought to draw such inferences in
relation to the actual state of things as experience seemed to
warrant. The consequence of this was such a change in the
nature and composition of the essay as made it, in his own
language, "a new work." The book, so altered, appeared in
1803 under the title, An Essay on the Principle of Popu-
lation, or a View of its Past and Present Effects on Human
Happiness ; with an Enquiry into our prospects respecting the
future removal or mitigation of the evils which it occasions.

1 In his discourse at the Sorbonne (1750), Sur les progrts tuccessifs dt
Vesprit humain.

SYSTEM OF NATURAL LIBERTY. 115

In the original form of the essay he had spoken of no checks
to population but those which came under the head either of
vice or of misery. He now introduces the new element of the
preventive check supplied by what he calls "moral restraint,"
and is thus enabled, as he himself said, to "soften some of the
harshest conclusions" at which he had before arrived. The
treatise passed through five editions1 in his lifetime, and in all
of them he introduced various additions and corrections. That
of 1817 is the last he fully revised, and presents the text sub-
stantially as it has since been reprinted.

Notwithstanding the great development which he gave to
his work, and the almost unprecedented amount of discussion
to which it gave rise, it remains a matter of some difficulty to
discover what solid contribution he has made to our know-
ledge, nor is it easy to ascertain precisely what practical
precepts, not already familiar, he founded on his theoretic prin-
ciples. This twofold vagueness is well brought out in his
celebrated correspondence with Senior, in the course of which
it seems to be made apparent that his doctrine is new not so
much in its essence as in the phraseology in which it is couched.
He himself tells us that when, after the publication of the
original essay, the main argument of which he had deduced
from Hume, Wallace, Adam Smith, and Price, he began to
inquire more closely into the subject, he found that "much
more had been done" upon it "than he had been aware of."
It had " been treated in such a manner by some of the French
economists, occasionally by Montesquieu, and, among our own
writers, by Dr. Franklin, Sir James Steuart, Mr. Arthur Young,
and Mr. Townsend, as to create a natural surprise that it
had not excited more of the public attention." "Much, how-
ever," he thought, "remained yet to be done. The compari-
son between the increase of population and food had not,
perhaps, been stated with sufficient force and precision," and
"few inquiries had been made into the various modes by

1 Their dates are 1803, 1806, 1807, 1817, 1826.

lib POLITICAL ECONOMY.

which the level " between population and the means of subsist-
ence "is effected." The first desideratum here mentioned —
the want, namely, of an accurate statement of the relation
between the increase of population and that of food — Malthus
doubtless supposed to have been supplied by the celebrated
proposition that "population increases in a geometrical, food^
in an arithmetical ratib.'"r^TEi3~projpoiition, however, has been
'conclusively snown to be erroneous, there being no such differ-
ence of law between the increase of man and that of the organic
beings which form his food. J. S. Mill is indignant with
those who criticise Malthus's formula, which he groundlessly
describes as a mere " passing remark," because, as he thinks,
though erroneous, it sufficiently suggests what is true; but it
is surely important to detect unreal science, and to test strictly
the foundations of beliefs. When the formula which we
have cited is not used, other somewhat nebulous expressions
are frequently employed, as, for example, that "population
has a tendency to increase faster than food," a sentence in
which both are treated as if they were spontaneous growths,
and which, on account of the ambiguity of the word " tendency,"
is admittedly consistent with the fact asserted by Senior,
that food tends to increase faster than population. It must
always have been perfectly well known that population will
probably (though not necessarily) increase with every augmen-
tation of the supply of subsistence, and may, in some instances,
inconveniently press upon, or even for a certain time exceed,
the number properly corresponding to that supply. Nor could
it ever have been doubted that war, disease, poverty — the last
two often the consequences of vice — are causes which keep
population down. In fact, the way in which abundance, in-
crease of numbers, want, increase of deaths, succeed each
other in the natural economy, when reason does not intervene,
ha4 been fully explained by the Rev. Joseph Townsend in
his Dissertation on the Poor Laivs (1786), which, we have
seen, was known to Malthus. Again, it is surely plain
enough that the apprehension by individuals of the evils of

SYSTEM OF NATURAL LIBERTY. 117

poverty, or a sense of duty to their possible offspring, may
retard the increase of population, and has in all civilised
communities operated to a certain extent in that way. It is
only when such obvious truths are clothed in the technical
terminology of " positive " and " preventive checks " that
they appear novel and profound ; and yet they appear to con-
tain the whole message of Malthus to mankind. The labo-
rious apparatus of historical and statistical facts respecting
the several countries of the globe, adduced in the altered
form of the essay, though it contains a good deal that is
curious and interesting, establishes no general result which
was not previously well known, and is accordingly ignored
by James Mill and others, who rest the theory on facts patent
to universal observation. Indeed, as we have seen, the entire
historical inquiry was an after-thought of Malthus, who,
before entering on it, had already announced his fundamental
principle. ^~-

It would seem, then, that what has been ambitiously called
Malthus's theory of population, instead of being a great dis-
covery, as some have represented it, or a poisonous novelty,
as others have considered it, is no more than a formal enun-
ciation of obvious, though sometimes neglected, facts. The
pretentious language often applied to it by economists is
objectionable, as being apt to make us forget that the whole
subject with which it deals is as yet very imperfectly under-
stood— the causes which modify the force of the sexual
instinct, and those which lead to variations in fecundity, still
awaiting a complete investigation.1

I|j is the law o^diminishing returns from_land (of which
more will be said hereafter), involving as it does — though
only hypothetically — the prospect of a continuously increasing
difficulty in obtaining the necessary sustenance for all the
members of a society, that gives the principal importance to
population as an economic factor. It is, in fact, the conflu-

1 On this subject see the speculations of Herbert Spencer in his
Principles of Biology, Part VI. chaps, xii. xiii.

il8 POLITICAL ECONOMY.

ence of the Malthusian ideas with the theories of Ricardo,
especially with the corollaries which the latter, as we shall
see, deduced from the doctrine of rent (though these were
not accepted by Malthus), that has led to the introduction
of population as an element in the discussion of so many
economic questions in recent times.

Malthus had undoubtedly the great merit of having called
public attention in a striking and impressive way to a subject
which had neither theoretically nor practically been sufficiently
considered. But he and his followers appear to have greatly
exaggerated both the magnitude and the urgency of the
dangers to which they pointed.1 In their conceptions a single
social imperfection assumed such portentous dimensions that
it seemed to overcloud the whole heaven and threaten the
world with ruin. This doubtless arose from his having at
first omitted altogether from his view of the question the
great counteracting agency of moral restraint. Because a
force exists, capable, if unchecked, of producing certain
results, it does not follow that those results are imminent or
even possible in the sphere of experience. A body thrown
from the hand would, under the single impulse of projection,
move for ever in a straight line ; but it would not be reason-
able to take special action for the prevention of this result,
ignoring the fact that it will be sufficiently counteracted by
the other forces which will come into play. And such other
forces exist in the case we are considering. If the inherent
energy of the principle of population (supposed everywhere
the same) is measured by the rate at which numbers increase
under the most favourable circumstances, surely the force of
less favourable circumstances, acting through prudential or
altruistic motives, is measured by the great difference between
this maximum rate and those which are observed to prevail in
most European countries. Under a rational system of insti-

i Malthus himself said : — " It is probable that, having found the bow
bent too much one way, I was induced to bend it too much the other in
order to make it straight."

SYSTEM OF NATURAL LIBERTY. 119

tutions, the adaptation of numbers to the means available for
their support is effected by the felt or anticipated pressure
of circumstances and the fear of social degradation, within a
tolerable degree of approximation to what is desirable. To
bring the result nearer to the just standard, a higher measure
of popular enlightenment and more serious habits of moral
reflection ought indeed to be encouraged. But it is the duty
of the individual to his actual or possible offspring, and not
any vague notions as to the pressure of the national population
on subsistence, that will be adequate to influence conduct.

The only obligation on which Malthus insists is that of
abstinence from marriage so long as the necessary provision
for a family has not been acquired or cannot be reasonably
anticipated. The idea of post-nuptial continence, which has
since been put forward by J. S. Mill and others, is foreign to
his view. He even suggests that an allowance might be made
from the public funds for every child in a family beyond the
number of six, on the ground that, when a man marries, he
cannot tell how many children he shall have, and that the
relief from an unlooked-for distress afforded by such a grant
would not operate as an encouragement to marriage. The
duty of economic prudence in entering on the married state is
plain ; but in the case of working men the idea of a secured
provision must not be unduly pressed, and it must also be
remembered that the proper age for marriage in any class de-
pends on the duration of life in that class. Still, too early mar-
riages are certainly not unfrequent, and they are attended with
other than economic evils, so that possibly even legal measures
might with advantage be resorted to for preventing them in all
ranks by somewhat postponing the age of full civil competence
— a change, however, which would not be without its dangers.
On the other hand, the Malthusians often speak too lightly of
involuntary celibacy, not recognising sufficiently that it is a
deplorable necessity. They do not adequately estimate the value
of domestic life as a school of the civic virtues, and the social
importance (even apart from personal happiness) of the mutual

120 POLITICAL ECONOMY.

affective education arising from the relations of the sexes in a
well-constituted union.

fi^althus further infers from his principles that states should
not artificially stimulate population, and in particular that
poor-laws should not be established, and, where they exist,
should be abolishes The first part of this proposition cannot
be accepted as applying to every social phase, for it is evident
that in a case like that of ancient Borne, where continuous
conquest was the chief occupation of the national activity, or
in other periods when protracted wars threatened the inde-
pendence or security of nations, statesmen might wisely take
special action of the kind deprecated by Malthus. In relation
to modern industrial communities he is doubtless in general
right, though the promotion of immigration in new states is
similar in principle to the encouragement of population. The
question of poor-laws involves other considerations. The
English system of his day was, indeed, a vicious one, though
acting in some degree as a corrective of other evils in our
social institutions ; and efforts for its amendment tended to the
public good. But the proposal of abolition is one from which
statesmen have recoiled, and which general opinion has never
adopted. It is difficult to believe that the present system will
be permanent ; it is too mechanical and undiscriminating ; on
some sides too lax, it is often unduly rigorous in the treatment
of the worthy poor who are the victims of misfortune ; and,
in its ordinary modes of dealing with the young, it is open to
grave objection. But it would certainly be rash to abolish it ;
it is one of several institutions which will more wisely be
retained until the whole subject of the life of the working
classes has been more thoroughly, and also more sympatheti-
cally, studied. The position of Malthus with respect to the
relief of destitution is subject to this general criticism, that>
first proving too much, he then shrinks from the consequences
of his own logic. It follows from his arguments, and is indeed
explicitly stated in a celebrated passage of his original essay,
that he who has brought children into the world without

SYSTEM OF NATURAL LIBERTY. 121

adequate provision for them should be left to the punishment
of Nature, that " it is a miserable ambition to wish to snatch
the rod from her hand," and to defeat the action of her laws,
which are the laws of God, and which " have doomed him
and his family to suffer." Though his theory leads him to
this conclusion, he could not, as a Christian clergyman, main-
tain the doctrine that, seeing our brother in need, we ought
to shut up our bowels of compassion from him ; and thus he
is involved in the radical inconsequence of admitting the law-
fulness, if not the duty, of relieving distress in cases where he
yet must regard the act as doing mischief to society. Buckle,
who was imposed on by more than one of the exaggerations
of the economists, accepts the logical inference which Malthua
evaded. He alleges that the only ground on which we are
justified in relieving destitution is the essentially self-regard-
ing one, that by remaining deaf to the appeal of the sufferer we
should probably blunt the edge of our own finer sensibilities.

It can scarcely be doubted that the favour which was at
once accorded to the views of Malthus in certain circles was
due in part to an impression, very welcome to the higher ranks
of society, that they tended to relieve the rich and powerful
of responsibility for the condition of the working classes, by
showing that the latter had chiefly themselves to blame, and
not either the negligence of their superiors or the institutions
of the country. The application of his doctrines, too, made
by some of his successors had the effect of discouraging all
active effort for social improvement. Thus Chalmers " reviews
seriatim and gravely sets aside all the schemes usually pro-
posed for the amelioration of the economic condition of the
people " on the ground that an increase of comfort will lead
to an increase of numbers, and so the last state of things will
be worse than the first.

Malthus has in more recent times derived a certain degree
of reflected lustre from the rise and wide acceptance of the
Darwinian hypothesis. Its author himself, in tracing its
filiation, points to the phrase " struggle for existence " used by

122 POLITICAL ECONOMY.

Malthus in relation to the social competition. Darwin believes
that man has advanced to his present relatively high condition
through such a struggle, consequent on his rapid multiplication.
He regards, it is true, the agency of this cause for the improve-
ment of our race as largely superseded by moral influences in
the more advanced social stages. Yet he considers it, even
in these stages, of so much importance towards that end,
that notwithstanding the individual suffering arising from
the struggle for life, he deprecates any great reduction in
the natural, by which he seems to mean the ordinary, rate of
increase.

There has been of late exhibited in some quarters a ten-
dency to apply the doctrine of the " survival of the fittest "
to human society in such a way as to intensify the harsher
features of Malthus's exposition by encouraging the idea that
whatever cannot sustain itself is fated, and must be allowed,
to disappear. But what is repellent in this conception is
removed by a wider view of the influence of Humanity, as
a disposing power, alike on vital and on social conditions. As
in the general animal domain the supremacy of man introduces
a new force consciously controlling and ultimately determining
the destinies of the subordinate species, so human providence
in the social sphere can intervene for the protection of the
weak, modifying by its deliberate action what would otherwise
be a mere contest of comparative strengths inspired by selfish
instincts.1

David Ricardo (1772-1823) is essentially of the school of
Smith, whose doctrines he in the main accepts, whilst he
seeks to develop them, and to correct them in certain par-

* The Essay on Population and the Inquiry into the Nature and Pro-
gressqfRent (i8i5), to be hereafter mentioned, are by far the most im-
portant contributions of Malthus to the science. He was also author of
Principles of Political Economy (1820), Definitions in Political Economy
(1827), and other minor pieces. On these less important writings of
Malthus, and on his personal history, see Malthus and his Work (i885),
by James Bonar, who has also edited (1888) the Letters of Ricardo to
MaWms.

SYSTEM OF NATURAL LIBERTY. 123

ticulars. But his mode of treatment is very different fiom
Smith's. The latter aims at keeping close to the realities of
life as he finds them, — at representing the conditions and
relations of men and things as they are ; and, as Hume re-
marked on first reading his great work, his principles are
everywhere exemplified and illustrated with curious facts.
Quite unlike this is the way in which Kicardo proceeds. He
moves in a world of abstractions. He sets out from more or
less arbitrary assumptions, reasons deductively from these, and
announces his conclusions as true, without allowing for the
partial unreality of the conditions assumed or confronting
his results with experience. When he seeks to illustrate his
doctrines, it is from hypothetical cases, — his favourite device
being that of imagining two contracting savages, and consider-
ing how they would be likely to act. He does not explain —
probably he had not systematically examined, perhaps was
not competent to examine — the appropriate method of poli-
tical economy; and the theoretic defence of his mode of
proceeding was left to be elaborated by J. S. Mill and Cairnes.
But his example had a great effect in determining the practice
of his successors. There was something highly attractive to
the ambitious theorist in the sweeping march of logic which
seemed in Ricardo's hands to emulate the certainty and com-
prehensiveness of mathematical proof, and in the portable and
pregnant formulae which were so convenient in argument, and
gave a prompt, if often a more apparent than real, solution of
difficult problems. Whatever there was of false or narrow
in the fundamental positions of Smith had been in a great
degree corrected by his practical sense and strong instinct for
reality, but was brought out in its full dimensions and even
exaggerated in the abstract theorems of Kicardo and his
followers.

The dangers inherent in his method were aggravated by the
extreme looseness of his phraseology. Senior pronounces him
"the most incorrect writer who ever attained philosophical
eminence.1' His most ardent admirers find him fluctuating

I24 POLITICAL ECONOMY.

and uncertain in the use of words, and generally trace his errors
to a confusion between the ordinary employment of a term and
some special application of it which he has himself devised.

The most complete exposition of his system is to be found in
his Principles of Political Economy and Taxation (1817). This
work is not a complete treatise on the science, but a rather
loosely connected series of disquisitions on value and price, rent,
wages and profits, taxes, trade, money and banking. Yet, though
the connection of the parts is loose, the same fundamental ideas re-
cur continually, and determine the character of the entire scheme.

The principal problem to which he addresses himself in this
work is that of distribution, — that is to say, the proportions of
the whole produce of the. country which will be allotted to the
proprietor of land, to the capitalist, and to the labourer.1 And
it is important to observe that it is especially the variations in
their respective portions which take place in the progress of
society that he professes to study, — one of the most unhistorical
of writers thus indicating a sense of the necessity of a doctrine of
economic dynamics — a doctrine which, from his point of view,
it was impossible to supply.

The principle which he puts first in order, and which is
indeed the key to the whole, is this — fftaf- tihft exchange
value of any commodity_the_j?uj^ly_j)^^ — in-
creased at^wjILJg reg^qjipd,. under a regime of free^campeti- .
tion, by the labour necessary for its production. Similar propo-
sitions are to be found in the Wealth of Nations, not to speak
of earlier English writings. Smith had said that, " in the early
and rude state of society which precedes both the accumulation
of stock and the appropriation of land, the proportion between
the quantities of labour necessary for acquiring different objects
seems to be the only circumstance which can afford any rule for
exchanging them with one another." But he wavers in his con-
ception, and presents as the measure of value sometimes the
quantity of labour necessary for the production of the object,

1 " Political economy, you think, is an enquiry into the nature and
causes of wealth; I think it should rather be called an enquiry into the
laws that determine the division of the produce of industry amongst the
classes who concur in its formation." — Letters of Bicardo to Malthus,
ed. by J. Bonar (1889).

SYSTEM OF NATURAL LIBERTY. 125

sometimes the quantity of labour which the object would com-
mand in the market, which would be identical only for a given
time and place. The theorem requires correction for a deve-
loped social system by the introduction of the consideration
of capital, and takes the form in which it is elsewhere quoted
from Malthus by Ricardo, that the real price of a commodity
" depends on the greater or less quantity of capital and labour
which must be emplgyp-d fro piv>Hnr»A i*-," ^ (The expression
" quantity of capital " is lax, the element of time being omitted,
but the meaning is obvious.) Bicardo, however, constantly
faiVpq no notice of capital, mentioning labour alone in his state-
ment of this principle, and seeks to justify his practice by
treating_capital as "accumulated labourj" but this artificial
way of viewing the facts obscures the nature of the co-opera-
tion of capital in production, and by keeping the necessity of
this co-operation out of sight has encouraged some socialistic
errors. Bicardo does not sufficiently distinguish between the
cause or determinant and the measure of value ; nor does he
carry back the principle of cost of production as regulator of
value to its foundation in the effect of that cost on the limita-
tion of supply. It is the " natural price " of a commodity that
is fixed by the theorem we have stated ; the market price will
be subject to accidental and temporary variations from this
standard, depending on changes in demand and supply ; but
the price will, permanently and in the long run, depend on
cost of production denned as above. On this basis Bicardo
goes on to explain the laws according to which the produce of
the land and the labour of the country is distributed amongst
the several classes which take part in production.

The theory of rent, with which he begins, though commonly
associated with his name, and though it certainly forms the
most vital part of his general economic scheme, was not really
hisf nor did he lay claim to it. ^Ie distinctly states in the
preface to the Principles, that "in 1815 Mr Malthus, in his
Inquiry into the Nature and Progress of Rent, and a fellow of
University College, Oxford, in his Essay on the Application of

126 POLITICAL ECONOMY.

Capital to Land, presented to the world, nearly at the sam«
moment, the true doctrine of rent." The second writer here
referred to was Sir Edward West, afterwards a judge of the
supreme court of Bombay. Still earlier than the time of
Malthus and West, as M'Culloch has pointed out, this doctrine
had been clearly conceived and fully stated by Dr. James
Anderson in his Enquiry into the Nature of Corn-Laws^ pub-
lished at Edinburgh in I777.1 That this tract was unknown
to Malthus and West we have every reason to believe ; but
the theory is certainly as distinctly enunciated and as satis-
factorily supported in it as in their treatises ; and the whole
way in which it is put forward by Anderson strikingly re-
sembles the form in which it is presented by Eicardo.

The essence of the theory is that rent, being the price paid
by the cultivator to the owner of land for the use of its
productive powers, is equal to the excess of the price of the
produce of the land over the cost of production on that land.
With the increase of population, and therefore of demand for
food, inferior soils will be taken into cultivation; and the
price of the entire supply necessary for the community will be
regulated by the cost of production of that portion of the
supply which is produced at the greatest expense. But for
the land which will barely repay the cost of cultivation no
rent will be paid. Hence the rent of any quality of land will
be equal to the difference between the cost of production on
that land and the cost of production of that produce which is
raised at the greatest expense.

The doctrine is perhaps most easily apprehended by means
of the supposition here made of the coexistence in a country
of a series of soils of different degrees of fertility which are
successively taken into cultivation as population increases.
But it would be an error to believe, though Kicardo some-
times seems to imply it, that such difference is a necessary

1 Anderson's account of the origin of rent is reprinted in the Select
Collection of Scarce and Valuable Economical Tracts, edited fior Lord
Overstone by J. R. M'Culloch, 1859.

SYSTEM OF NATURAL LIBERTY. 127

condition of the existence of rent. If all the land of a
country were of equal fertility, still if it were appropriated,
and if the price of the produce were more than an equivalent
for the labour and capital applied to its production, rent would
be paid. This imaginary case, however, after using it to clear

r conceptions, we may for the future leave out of account.

The price of produce being, as we have said, regulated by
the cost of production of that which pays no rent, it is evident
that " corn is not high because a rent is paid, but a rent is
paid because corn is high," and that " no reduction would take
place in the price of corn although landlords should forego the
whole of their rent." "Rani; ia3 in fact, no determining element
of_price; it is paid, indeed, out of the price, but the price
would be the same if no rent were paid, and the whole price
were retained by the cultivator.

It has often been doubted whether or not Adam Smith
held this theory of rent. Sometimes he uses language which
seems to imply it, and states propositions which, if developed,
would infallibly lead to it. Thus he says, in a passage
already quoted, " Such parts only of the produce of land can
commonly be brought to market of which the ordinary price
is sufficient to replace the stock which must be employed in
bringing them thither, together with its ordinary profits. If
the ordinary price is more than this, the surplus part of it
will naturally go to the rent of land. If it is not more, though
ths commodity can be brought to market, it can afford no rent
to the landlord. Whether the price is or is not more depencfc^
on the demand/* Again, in Smith's application of these con-
siderations to mines, " the whole principle of rent," Kicardo
tells us, " is admirably and perspicuously explained." But he
had formed the opinion that there is in fact no land which
does not afford a rent to the landlord ; and, strangely, he
seems not to have seen that this appearance might arise from
the aggregation into an economic whole of parcels of land
which can and others which cannot pay rent The truth,
indeed, is, that the fact, if it were a fact, that all the land

128 POLITICAL ECONOMY.

in a country pays rent would be irrelevant as an argument
against the Andersonian theory, for it is the same thing in
substance if there be any capital employed on land already
cultivated which yields a return no more than equal to ordi-
nary profits. Such last-employed capital cannot afford rent
at the existing rate of profit, unless the price of produce
should rise.

The belief which some have entertained that Smith, notwith-
standing some vague or inaccurate expressions, really held the
Andersonian doctrine, can scarcely be maintained when we
remember that Hume, writing to him after having read for
the first time the Wealth of Nations, whilst expressing general
agreement with his opinions, said (apparently with reference
to Bk. I. chap, vii.), "I cannot think that the rent of farms
makes any part of the price of the produce, but that the price
is determined altogether by the quantity and the demand..*
ft is further noteworthy that a statement of the theory of
rent is given in the same volume, published in 1777, which
contains Anderson's polemic against Smith's objections to a
bounty on the exportation of corn ; this volume can hardly
have escaped Smith's notice, yet neither by its contents nor
by Hume's letter was he led to modify what he had said in
his first edition on the subject of rent.

It must be remembered that not merely the unequal fertilities
of different soils will determine differences of rent ; the more
or less advantageous situation of a farm in relation to markets,
and therefore to roads and railways, will have a similar effect.
Comparative lowness of the cost of transit will enable the pro-
duce to be brought to market at a smaller expense, and will
thus increase the surplus which constitutes rent This con-
sideration is indicated by Ricardo, though he does not give it
prominence, but dwells mainly on the comparative produc-
tiveness of soils.

BiPrt is defined by Eicardo as the price paid for the use of
"the original and indestructible powers of the soil." He thua
differentiates rent, as he uses the term, from what is popularly

SYSTEM OF NATURAL LIBERTY. 129

designated by the word ; and, when it is to be taken in his
sense, it is often qualified as the " true " or " economic " rent.
Part of what is paid to the landlord is often really profit on
his expenditure in preparing the farm for cultivation by the
tenant. But it is to be borne in mind that wherever such
improvements are " amalgamated with the land," and " add
permanently to its productive powers," the return for them
follows the laws, not of profit, but of rent Hence it becomes
difficult, if not impossible, in practice to discriminate with
any degree of accuracy the amount received by the landlord
"for the use of the original powers of the soil" from the
amount received by him as remuneration for his improve-
ments or those made by his predecessors. These have raised
the farm, as an instrument for producing food, from one class
of productiveness to a higher, and the case is the same as
if nature had originally placed the land in question in that
higher class.

Smith had treated it as the peculiar privilege of agriculture,
as compared with other forms of production, that in it " nature
labours along with man," and therefore, whilst the workmen
in manufactures occasion the reproduction merely of the capital
which employs them with its owner's profits, the agricultural
labourer occasions the reproduction, not only of the employer's
capital with profits, but also of the rent of the landlord. This
last he viewed as the free gift of nature which remained " after
deducting or compensating everything which can be regarded
as the work of man." Eicardo justly observes in reply that
" there is not a manufacture which can be mentioned in which
nature does not give her assistance to man." He then goes
on to quote from Buchanan the remark that " the notion of
agriculture yielding a produce and a rent in consequence,
because nature concurs with industry in the process of culti-
vation, is a mere fancy. It is not frnyp the prpjhffii ^m*1 from
the price, at which the produce is sold, that the rent is derived;
and this price is got, not because nature assists in the pro-
duction, but because it is the price which suits the consump-

I3o POLITICAL ECONOMY.

tion to the supply." l There is no gain to the society at
from the rise of rent; it is advantageous to the landlords
alone, and tneir interests are thus permanently in opposition
to those Of all other classes. I'he rise of rent may be retarded,
or prevented, or even temporarily changed to a fall, by agricul-
tural improvements, such as the introduction of new manures
or of machines or of a better organisation of labour (though
there is not so much room for this last as in other branches
of production), or the opening of new sources of supply in
foreign countries ; but the tendency to a rise is constant so
long as the population increases.

The great importance of the theory of rent in Ricardo's
system arises from the fact that he makes the general eco-
nomic condition of the society to depend altogether on the
position in which agricultural exploitation stands. This will
be seen from the following statement of his theory of wages
and profits. The produce of every expenditure of labour and
capital being divided between the labourer and the capitalist,
in proportion as one obtains more the other will neces-
sarily obtain less. The productiveness of labour being given,
nothing can diminish profit but a rise of wages, or increase
it but a fall of wages. Now the price of labour, being tho.
same as its cost of production, is determined by the price of
the commodities necessary for the support of the labourer.
The price of such manufactured articles as he requires has a
constant tendency to fall, principally by reason of the pro-
gressive application of the division of labour to their produc-
tion. But the cost of his maintenance essentially depends,
not on the price of those articles, but on that of his food;
and, as the production of food will in the progress of society

1 Senior, however, has pointed out that Smith is partly right ; whilst
it is true that rent is demanded because the productive powers of nature
are limited, and increased population requires a less remunerative ex-
penditure in order to obtain the necessary supply ; on the other hand,
it is the power which most land possesses of producing the subsistence
of more persons than are required for its cultivation that supplies the
fund out of which rent can be paid.

SYSTEM OF NATURAL LIBERTY. 131

and of population require the sacrifice of more and more
labour, its price will rise ; money wages will consequently
rise, and with the rise of wages profits will fall. Thus it is
to the necessary gradual descent to inferior soils, or less pro-
ductive expenditure on the same soil, that the decrease in
the rate of profit which has historically taken place is to be
attributed (Smith ascribed this decrease to the competition of
capitalists, though in one place, Book L chap, ix.,1 he had
a glimpse of the Ricardian view). This gravitation of profits
towards a minimum is happily checked at times by improve-
ments of the machinery employed in the production of neces-
saries, and especially by such discoveries in agriculture and
other causes as reduce the cost of the prime necessary of the
labourer; but here again the tendency is constant. Whilst
the capitalist thus loses, the labourer does not gain; his
increased money wages only enable him to pay the increased
price of his necessaries, of which he will have no greater
and probably a less share than he had before. In fact, the
labourer can never for any considerable time earn more than
what is required to enable the class to subsist in such a
degree of comfort as custom ha& made indispensable to them,
and to perpetuate their race without either increase or dimi-
nution. That is the " natural " price of labour ; and if
the market rate temporarily rises above it population will
be stimulated, and the rate of wages will again fall Thus
whilst rent has a constant tendency to rise and profit to fall,
the rise or fall of wages will depend on the rate of increase
of the working classes. For the improvement of their con-
dition Ricardo thus has to fall back on the Malthusian remedy,
of the effective application of which he does not, however,
to have much expectation. The securities against a

1 "A« the colony increases, the profits of stock gradually diminish.
When the most fertile and best situated lands have been all occupied,
less profit can be made by the cultivation of what is inferior both in soil
and situation, and less interest can be afforded for the stock which is M
employed." The view in question had been anticipated by Weak

132 POLITICAL ECONOMY.

superabundant population to which he points are the gradual
abolition of tlie poor-laws — for their amendment would not
content him — and the development amongst the working
classes of a taste for greater comforts and enjoyments.

It will be seen that the socialists have somewhat exagge-
rated in announcing, as Ricardo's " iron law " of wages, their
absolute identity with the amount necessary to sustain the
existence of the labourer and enable him to continue the race.
He recognises the influence of a "standard of living" as limit-
ing the increase of the numbers of the working classes, and
so keeping their wages above the lowest point. But he also
holds that, in long-settled countries, in the ordinary course of
human affairs, and in the absence of special efforts restricting
the growth of population, the condition of the labourer will
decline as surely, and from the same causes, as that of the
landlord will be improved.

If we are asked whether this doctrine of rent, and the con-
sequences which Eicardo deduced from it, are true, we must
answer that they are jiypothetically true in the most advanced
industrial communities, and there only (though they have
been rashly applied to the cases, of India and Ireland), but
that even in those communities neither safe inference nor
sound action can be builtjipoii them. As we shall see here-
after, the value of most of the theorems of the classical eco-
nomics is a good deal attenuated by the habitual assumptions
that we are dealing with " economic men," actuated by one
principle only ; that custom, as against competition, has no
existence ; that there is no such thing as combination ; that
there is equality of contract between the parties to each trans-
action, and that there is a definite universal rate of profit and
wages in a community; this last postulate implying (i) that
the capital embarked in any undertaking will pass at once to
another in which larger profits are for the time to be made ;
(2) that a labourer, whatever his local ties of feeling, family,
habit, or other engagements, will transfer himself immediately
V» any pkce where, or employment in which, for the time,

SYSTEM OF NATURAL LIBERTY. 133

larger wages are to be earned than those he had previously
obtained ; l and (3) that both capitalists and labourers have
a perfect knowledge of the condition and prospects of industry
throughout the country, both in their own and other occupa-
tions. But in Ricardo's speculations on rent and its conse-
quences there is still more of abstraction. The influence of
emigration, which has assumed vast dimensions since his time,
ii left out of account, and the amount of land at the disposal f,
of a community is supposed limited to its own territory, whilst
contemporary Europe is in fact largely fed by the western
States of America. He did not adequately appreciate the
degree in which the augmented productiveness of labour,
whether from increased intelligence, improved organisation,
introduction of machinery, or more rapid and cheaper com-
munication, steadily keeps down the cost of production. To
these influences must be added those of legal reforms in
tenure, and fairer conditions in contracts, which operate in
the same direction. As a result of all these causes, the pres-
sure anticipated by Ricardo is not felt, and the cry is of the
landlords over falling rents, not of the consumer over rising
prices. The entire conditions are in fact so altered that
Professor Nicholson, no enemy to the " orthodox " economics,
when recently conducting an inquiry into the present state of
the agricultural question,2 pronounced the so-called Ricardian \
theory of rent "too abstract to be of practical utility."

A particular economic subject on which Ricardo has thrown
a useful light is the nature of the advantages derived from
foreign commerce, and the conditions under which such com-
merce can go on. Whilst preceding writers had represented
those benefits as consisting in affording a vent for surplus
produce, or enabling a portion of the national capital to re-
place itself with a profit, he pointed out that they consist

1 Adam Smith says : — " It appears evidently from experience that man
is, of all sorts of luggage, the most difficult to be transported " ( Wealth
of Nations, Bk. I. chap. viii. ).

2 Tenant's Gain not Landlord's Loss (1883), p. 83.

I34 POLITICAL ECONOMY.

"simply and solely in this, that it enables each nation t«
obtain, with a given amount of labour and capital, a greater
quantity of all commodities taken together." This is no doubt
the point of view at which we should habitually place our-
selves ; though the other forms of expression employed by hia
predecessors, including Adam Smith, are sometimes useful as
representing real considerations affecting national production,
and need not be absolutely disused. **Kicardo proceeds to
show that what determines the purchase of any commodity
from a foreign country is joot the circumstance that it can be
produced there with less labour and capital than at homef
If we have a greater positive advantage in the production of
some other article than in that of the commodity in question,
even though we have an advantage in producing the latter,
it may be our interest to devote ourselves to the production
of that in which we have the greatest advantage, and to im-
port that in producing which we should have a less, though a
Teal, advantage. It is, in short, not absolute cost of produc-
tion, but comparative cost, which determines the interchange,
This remark is just and interesting, though an undue import-
ance seems to be attributed to it by J. S. Mill and Cairnes,
the latter of whom magniloquently describes it as " sounding
the depths " of the problem of international dealings, — though,
as we shall see hereafter, he modifies it by the introduction
of certain considerations respecting the conditions of domestic
production.

For the nation as a whole, according to Eicardo, it is not
the gross produce of the land and labour, as Smith seems to
assert, that is of importance, but the net income — the excess,
that is, of this produce over the cost of production, or, in
other words, the amount of its rent and its profits ; for the
wages of labour, not essentially exceeding the maintenance
of the labourers, are by him considered only as a part of the
" necessary expenses of production." Hence it follows, as he
himself in a characteristic and of ten- quoted passage says, that,
" provided the net real income of the nation be the same, it

SYSTEM OF NATURAL LIBERTY. 135

is of no importance whether it consists of ten or twelve
millions of inhabitants. If five millions of men could pro-
duce as much food and clothing as was necessary for ten
millions, food and clothing for five millions would be the net
revenue. Would it be of any advantage to the country that to
produce this same net revenue seven millions of men should
be required, — that is to say, that seven millions should be
employed to produce food and clothing sufficient for twelve
millions? The food and clothing of five millions would be
still the net revenue. The employing a greater number of
men would enable us neither to add a man to our army and
navy nor to contribute one guinea more in taxes." Industry
is here viewed, just as by the mercantilists, in relation to the
military and political power of the state, not to the maintenance
and improvement of human beings, as its end and aim. The
labourer, as Held1 has remarked, is regarded not as a member
of society, but as a means to the ends of society, on whose
sustenance a part of the gross income must be expended, as
another part must be spent on the sustenance of horses. We
may well ask, as Sismondi did in a personal interview with
Bicardo, " What 1 is wealth then everything ? are men abso-
lutely nothing 1 "

On the whole what seems to us true of Ricardo is this, that,
whilst he had remarkable powers, they were not the powers
best fitted for sociological research. Nature intended him
rather for a mathematician of the second order than for a
social philosopher. Nor had he the due previous preparation
for social studies ; for we must decline to accept Bagehot's
idea that, though " in no high sense an educated man," he
had a specially apt training for such studies in his practice as
an eminently successful dealer in stocks. The same writer
justly notices the " anxious penetration with which he follows
out rarefied minutiae." But he wanted breadth of survey, a
comprehensive view of human nature and human life, and
the strong social sympathies which, as the greatest minds have
recognised, are a most valuable aid in this department of study.
1 Zivei Biicher zur Socialen Geschichte Englands, p. 194.

136 POLITICAL ECONOMY.

On a subject like that of money, where a few elementary pro
positions — into which no moral ingredient enters — have alone
to be kept in view, he was well adapted to succeed ; but in
the larger social field he is at fault. He had great deductive
readiness and skill (though his logical accuracy, as Mr. Sidg-
wick remarks, has been a good deal exaggerated). But in
human affairs phenomena are so complex, and principles so
constantly limit or even compensate one another, that rapidity
and daring in deduction may be the greatest of dangers, if
they are divorced from a wide and balanced appreciation of
facts. Dialectic ability is, no doubt, a valuable gift, but the
first condition for success in social investigation is to see
things as they are.

A sort of Eicardo-mythna for some time existed in eco-
nomic circles. It cannot be doubted that the exaggerated
estimate of his merits arose in part from a sense of the support
his system gave to the manufacturers and other capitalists in
their growing antagonism to the old aristocracy of landowners.
The same tendency, as well as his affinity to their too abstract
and unhistorical modes of thought, and their eudaBmonistic
doctrines, recommended him to the Benthamite group, and
to the so-called Philosophical Radicals generally. Brougham
said he seemed to have dropped from the skies — a singular
avatar, it must be owned. His real services in connection
with questions of currency and banking naturally created a
prepossession in favour of his more general views. But,
apart from those special subjects, it does not appear that,
either in the form of solid theoretic teaching or of valuable
practical guidance, he has really done much for the world,
whilst he admittedly misled opinion on several important
questions. De Quincey's presentation of him as a great
revealer of truth is now seen to be an extravagance. J. S.
Mill and others speak of his "superior lights" as compared
with those of Adam Smith ; but his work, as a contribution
to our knowledge of human society, will not bear a moment'!
comparison with the Wealth of Nations.

SYSTEM OF NATURAL LIBERTY. 137

It is interesting to observe that Maltjujs, though the com-
bination of his doctrine of population with the principles of
Kicardo composed the creed for some time professed by all the
" orthodox " economists, did not himself accept the Ricardian
scheme. He prophesied that " the main part of the structure
wo'ild not stand." "The theory," he says, "takes a partial
view of the subject, like the system of the French economists ;
and, like that system, after having drawn into its vortex a
great number of very clever men, it will be unable to support
itself against the testimony of obvious facts, and the weight
of those theories which, though less simple and captivating,
are more just, on account of their embracing more of the causes
which are in actual operation in all economical results."

We saw that the foundations of Smith's doctrine in general
philosophy were unsound, and the ethical character of his
scheme in consequence injuriously affected; but his mode of
treatment, consisting in the habitual combination of induction
and deduction, we found little open to objection. Mainly
through the influence of Kicardo, economic method was per-
verted. The science was led into the mistaken course of
turning its back on observation, and seeking to evolve the
laws of phenomena out of a few hasty generalisations by a
play of logic. The principal vices which have been in recent
times not unjustly attributed to the members of the "orthodox"
school were all encouraged by his example, namely, — (Tj^ the
viciously abstract character of the conceptions with which
they deal, (|J. the abusive preponderance of deduction in then-
processes of research, and (jj,the too absolute way in which
their conclusions are conceived and enunciated.

The works of Ricardo have been collected in one volume,
with a biographical notice, by J. R. M'Culloch (I846).1

1 A sketch of Ricardo's personal history, and an account of his writ-
ings on monetary questions, which could not conveniently be introduced
here, will be found under his name in the Encyclopaedia Britannica, gth
edition.

I38 POLITICAL ECONOMY.

After Malthus and Ricardo, the first of whom had fixec
public attention irresistibly on certain aspects of society, and
the second had led economic research into new, if questionable,
paths, came a number of minor writers who were mainly their
expositors and commentators, and whom, accordingly, the
Germans, with allusion to Greek mythical history, designate
as the Epigoni. By them the doctrines of Smith and hi«
earliest successors were thrown into more systematic shape,
limited and guarded so as to be less open to criticism, couched
in a more accurate terminology, modified in subordinate par-
ticulars, or applied to the solution of the practical questions
of their day.

James Mill's Elements (1821) deserves special notice, as
exhibiting the system of Eicardo with thorough-going rigour,
and with a compactness of presentation, and a skill in the
disposition of materials, which give to it in some degree the
character of a work of art. The a priori political economy
is here reduced to its simplest expression. J. E. M'Culloch
(1779-1864), author of a number of laborious statistical and
other compilations, criticised current economic legislation in
the Edinburgh Review from the point of view of the Ricardiau
doctrine, taking up substantially the same theoretic position
as was occupied at a somewhat later period by the Manchester
school. He is altogether without originality, and never
exhibits any philosophic elevation or breadth. His confident
dogmatism is often repellent ; he admitted in his later years
that he had been too fond of novel opinions, and defended
them with more heat and pertinacity than they deserved. It
is noticeable that, though often spoken of in his own time
both by those who agreed with his views, and those, like
Sismondi, who differed from them, as one of the lights of
the reigning school, his name is now tacitly dropped in the
writings of the members of that school. Whatever may have
been his partial usefulness in vindicating the policy of free
trade, it is at least plain that for the needs of our social future
he has nothing to offer. Nassau William Senior (1790—1864),

SYSTEM OF NATURAL LIBERTY. 139

who was professor of political economy in the university of
Oxford, published, besides a number of separate lectures, a
treatise on the science, which first appeared as an article in
the Encyclopaedia Metropolitana. He is a writer of a high
order of merit. He made considerable contributions to the
elucidation of economic principles, specially studying exact-
ness in nomenclature and strict accuracy in deduction. His
explanations on cost of production and the way in which it
affects price, on rent, on the difference between rate of wages
and price of labour, on the relation between profit and wages
(with special reference to Ricardo's theorem on this subject,
which he corrects by the substitution of proportional for
absolute amount), and on the distribution of the precious
metals between different countries, are particularly valuable.
His new term " abstinence," invented to express the conduct
for which interest is the remuneration, was useful, though
not quite appropriate, because negative in meaning. It is on
the theory of wages that Senior is least satisfactory. He
makes the average rate in a country (which, we must main-
tain, is not a real quantity, though the rate in a given employ-
ment and neighbourhood is) to be expressed by the fraction
of which the numerator is the amount of the wages fund (an
unascertainable and indeed, except as actual total of wages
paid, imaginary sum) and the denominator the number of the
working population; and from this he proceeds to draw the
most important and far-reaching consequences, though the
equation on which he founds his inferences conveys at most
only an arithmetical fact, which would be true of every case
of a division amongst individuals, and contains no economic
element whatever. The phrase "wages fund" originated in
gome expressions of Adam Smith 1 used only for the purpose
of illustration, and never intended to be rigorously interpreted;

1 Thus, in Wealth of Nations, Bk. I. chap, viii., we have the phrases —
"the funds which are destined to the payment of wages," "thefundi
destined for employing industry " " the funds destined for the mainte-
nance of servants."

140 POLITICAL ECONOMY.

and we shall see that the doctrine has been repudiated bj
several members of what is regarded as the orthodox school
of political economy. As regards method, Senior makes the
science a purely deductive one, in which there is no room
for any other " facts " than the four fundamental propositions
from which he undertakes to deduce all economic truth. And
he does not regard himself as arriving at hypothetic conclu-
sions ; his postulates and his inferences are alike conceived as
corresponding to actual phenomena.1 Colonel Eobert Torrens
(1780-1864) was a prolific writer, partly on economic theory,
but principally on its applications to financial and commercial
policy. Almost the whole of the programme which was
carried out in legislation by Sir Robert Peel had been laid
down in principle in the writings of Torrens. He gave sub-
stantially the same theory of foreign trade which was after-
wards stated by J. S. Mill in one of his Essays on Unsettled
Questions.2 He was an early and earnest advocate of the
repeal of the corn laws, but was not in favour of a general
system of absolute free trade, maintaining that it is expedient
to impose retaliatory duties to countervail similar duties im-
posed by foreign countries, and that a lowering of import
duties on the productions of countries retaining their hostile
tariffs would occasion an abstraction of the precious metals,
and a decline in prices, profits, and wages. His principal
writings of a general character were — The Economist [i.e.,
Physiocrat] Refuted, 1808; Essay on the Production of
Wealth, 1821 ; Essay on the External Corn-trade (eulogised by
Ricardo), $d ed., 1826; The Budget, a Series of Letters on
Financial, Commercial, and Colonial Policy, 1841-3. Harriet
Martineau (1802-1876) popularised the doctrines of Malthus
and Ricardo in her Illustrations of Political Economy (1832-

1 See the last of his Four Introductory Lectures on Political Economy^
1852.

2 Mill, however, tells us in his Preface to those Essays that his own
views on that subject had been entertained and committed tc writing
before tb« publication by Torrens of similar opinion*.

SYSTEM OF NATURAL LIBERTY. 141

34), a series of tales, in which there is much excellent descrip-
tion, but the effect of the narrative is often marred by the
somewhat ponderous disquisitions here and there thrown in,
usually in the form of dialogue.

Other writers who ought to be named in any history of the
science are Charles. Babbage, On the Economy of Machinery
and Manufactures (1832), chiefly descriptive, but also in part
theoretic ; William Thomas Thornton, Overpopulation and its
Bemedy (1846), A Plea for Peasant Proprietors (1848), On
Labour (1869; 2d ecL, 1870); Herman Merivale, Lectures on
Colonisation and Colonies (1841-2; new ed., 1861); T. C.
Banfield, The Organisation of Industry Explained (1844; 2d
ed., 1848); and Edward Gibbon Wakefield, A View of the
Art of Colonisation (1849). Thomas Chalmers, well known in
other fields of thought, was author of The Christian and Civic
Economy of Large Towns (1821-36), and On Political Eco-
nomy in Connection with the Moral State and Moral Prospects
of Society (1832); he strongly opposed any system of legai
charity, and, whilst justly insisting on the primary importance
of morality, industry, and thrift as conditions of popular well-
being, carried the Malthusian doctrines to excess. Nor was
Ireland without a share in the economic movement of the
period.1 Whately, having been second Drummond professor
of political economy at Oxford (in succession to Senior), and
delivered in that capacity his Introductory Lectures (1831),
founded in 1832, when he went to Ireland as archbishop of
Dublin, a similar professorship in Trinity College, Dublin.
It was first held by Mountifort Longfield, afterwards Judge
of the Landed Estates Court, Ireland (d. 1884). He published

J Samuel Crumpe, M.D., had published at Dublin in 1793 an Essay on
tkt Best Means of Providiny Employment for the People, which obtained
a prize offered by the Rojal Irish Academy for the best dissertation on
that subject. This is a meritorious work, and contains a good state-
ment of some of the leading principles of Adam Smith. John Hely
Hutchinson's Commercial Restraints of Ireland (1779) is important for
the economic history of that country.

I4a POLITICAL ECONOMY.

lectures on the science generally (1834), on Poor Laws (1834),
and on Commerce and Absenteeism (1835), which were marked
by independence of thought and sagacious observation. He
was laudably free from many of the exaggerations of his con-
temporaries; he said, in 1835, "in political economy we must
not abstract too much," and protested against the assumption
commonly made that " men are guided in all their conduct by
a prudent regard to their own interest." James A. Lawson
(afterwards Mr. Justice Lawson, d. 1887) also published
some lectures (1844), delivered from the same chair, which
may still be read with interest and profit; his discussion of
the question of population is especially good ; he also asserted
against Senior that the science is avide de faits, and that it
must reason about the world and mankind as they really are.

The most systematic and thorough-going of the earlier critics
of the Eicardian system was Kichard Jones (1790-1855), pro-
fessor at Haileybury. Jones has received scant justice at the
hands of his successors. J. S. Mill, whilst using his work,
gave his merits but faint recognition. Even Eoscher says
that he did not thoroughly understand Eicardo, without giving
any proof of that assertion, whilst he is silent as to the fact
that much of what has been preached by the German his-
torical school is found distinctly indicated in Jones's writings.
He has been sometimes represented as having rejected the
Andersonian doctrine of rent ; but such a statement is in-
correct. Attributing the doctrine to Malthus, he says that
that economist "showed satisfactorily that when land is culti-
vated by capitalists living on the profits of their stock, and
able to move it at pleasure to other employments, the expense
of tilling the worst quality of land cultivated determines the
average price of raw produce, while the difference of quality
of the superior lands measures the rents yielded by them."
What he really denied was the application of the doctrine to
all cases where rent is paid ; he pointed out in his Essay on
the Distribution of Wealth and on the Sources of Taxation,
1831, that, besides " farmers' rents," which, under the supposed

SYSTEM OF NATURAL LIBERTY. 143

conditions, conform to the above law, there are "peasant
rents," paid everywhere through the most extended periods
of history, and still paid over by far the largest part of the
earth's surface, which are not so regulated. Peasant rents he
divided under the heads of (i) serf, (2) metayer, (3) ryot, and
(4) cottier rents, a classification afterwards adopted in sub-
stance by J. S. Mill ; and he showed that the contracts fixing
their amount were, at least in the first three classes, deter-
mined rather by custom than by competition. Passing to the
superstructure of theory erected by Ricardo on the doctrine of
rent which he had so unduly extended, Jones denied most of
the conclusions he had deduced, especially the following: —
that the increase of farmers' rents is always contemporary
with a decrease in the productive powers of agriculture, and
comes with loss and distress in its train ; that the interests of
landlords are always and necessarily opposed to the interests
of the state and of every other class of society; that the diminu-
tion of the rate of profits is exclusively dependent on the
returns to the capital last employed on the land; and that
wages can rise only at the expense of profits.

The method followed by Jones is inductive; his conclu-
sions are founded on a wide observation of contemporary facts,
aided by the study of history. " If," he said, " we wish to
make ourselves acquainted with the economy and arrange-
ments by which the different nations of the earth produce and
distribute their revenues, I really know but of one way to
attain our object, and that is, to look and see. We must get
comprehensive views of facts, that we may arrive at principles
that are truly comprehensive. If we take a different method,
if we snatch at general principles, and content ourselves with
confined observations, two things will happen to us. First,
what we call general principles will often be found to have no
generality — we shall set out with declaring propositions to be
universally true which, at every step of our further progress,
we shall be obliged to confess are frequently false ; and,
secondly, we shall miss a great mass of useful knowledge which

144 POLITICAL ECONOMY.

those who advance to principles by a comprehensive examina-
tion of facts necessarily meet with on their road." The world
he professed to study was not an imaginary world, inhabited
by abstract "economic men," but the real world with the
different forms which the ownership and cultivation of land,
and, in general, the conditions of production and distribution,
assume at different times and places. His recognition of such
different systems of life in communities occupying different
stages in the progress of civilisation led to his proposal of what
he called a " political economy of nations." This was a protest
against the practice of taking the exceptional state of facts
which exists, and is indeed only partially realised, in a small
corner of our planet as representing the uniform type of
human societies, and ignoring the effects of the early history
and special development of each community as influencing its
economic phenomena.

It is sometimes attempted to elude the necessity for a
wider range of study by alleging a universal tendency in the
social world to assume this now exceptional shape as its
normal and ultimate constitution. Even if this tendency
were real (which is only partially true, for the existing order
amongst ourselves cannot be regarded as entirely definitive),
it could not be admitted that the facts witnessed in our
civilisation and those exhibited in less advanced communities
are so approximate as to be capable of being represented by
the same formulae. As Whewell, in editing Jones's Remains,
1859, well observed, it is true in the physical world that "all
things tend to assume a form determined by the force of
gravity ; the hills tend to become plains, the waterfalls to eat
away their beds and disappear, the rivers to form lakes in
the valleys, the glaciers to pour down in cataracts." But are
we to treat these results as achieved, because forces are in
operation which may ultimately bring them about 1 All human
questions are largely questions of time ; and the economic
phenomena which really belong to the several stages of the
human movement must be studied as they are, unless we are con-

SYSTEM OF NATURAL LIBERTY. 145

tent to fall into grievous error both in our theoretic treatment of
them and in the solution of the practical problems they present.

Jones is remarkable for his freedom from exaggeration and
one-sided statement ; thus, whilst holding Malthus in, perhaps,
undue esteem, he declines to accept the proposition that an
increase of the means of subsistence is necessarily followed by
an increase of population; and he maintains what is undoubtedly
true, that with the growth of population, in all well-governed
and prosperous states, the command over food, instead of
diminishing, increases.

Much of what he has left us — a large part of which is un-
fortunately fragmentary — is akin to the labours of Cliffe Leslie
at a later period. The latter, however, had the advantage of,
acquaintance with the sociology of Cpmte, which gave him a\
firmer grasp of method, as well as a wider view of the general
movement of society ; and, whilst the voice of Jones was but
little heard amidst the general applause accorded to Eicardo in
the economic world of his time, Leslie wrote when disillusion
had set in, and the current was beginning to turn in England
against the a priori economics.

Comte somewhere speaks of the "transient predilection"
for political economy which had shown itself generally in
western Europe. This phase of feeling was specially notice-
able in England from the third to the fifth decade of the
present century. " Up to the year 1818," said a writer in
the Westminster Review, " the science was scarcely known OP
talked of beyond a small circle of philosophers ; and legislation,
so far from being in conformity with its principles, was daily
receding from them more and more." Mill has told us what
a change took place within a few years. " Political economy,"
he says, "had asserted itself with great vigour in public
affairs by the petition of the merchants of London for free
trade, drawn up in 1820 by Mr. Tooke and presented by-
Mr. Alexander Baring,1 and by the noble exertions of Bicardo

1 Afterwards Lord Ashburton. For this Petition, see M'Culloch'i

I46 POLITICAL ECONOMY.

during the few years of his parliamentary life. His writing^
following up the impulse given by the bullion controversy,
and followed up in their turn by the expositions and com-
ments of my father and M'Culloch (whose writings in the
Edinburgh Review during those years were most valuable), had
drawn general attention to the subject, making at least partial
converts in the Cabinet itself ; and Huskisson, supported
by Canning, had commenced that gradual demolition of the
protective system which one of their colleagues" [Peel] "vir-
tually completed in 1846, though the last vestiges were only
swept away by Mr. Gladstone in 1860." Whilst the science
was thus attracting and fixing the attention of active minds, its
unsettled condition was freely admitted. The differences
of opinion among its professors were a frequent subject of
complaint. But it was confidently expected that these discre-
pancies would soon disappear, and Colonel Torrens predicted
that in twenty years there would scarcely " exist a doubt
respecting any of its more fundamental principles." " The
prosperity," says Mr. Sidgwick, " that followed on the aboli-
tion of the corn laws gave practical men a most impressive and
satisfying proof of the soundness of the abstract reasoning by
which the expediency of free trade had been inferred," and
when, in 1848, " a masterly expositor of thought had published
a skilful statement of the chief results of the controversies
of the preceding generation," with the due " explanations and
qualifications " of the reigning opinions, it was for some years
generally believed that political economy had " emerged from
the state of polemical discussion," at least on its leading doc-
trines, and that at length a sound construction had been erected
on permanent bases.

This expositor was John Stnarj} M1^ ^T^Q^~7?^- He
exercised, without doubt, a greater influence in the field of
English economics than any other writer since Kicardo.
His systematic treatise has been, either directly or through

Literature of Political Economy, p. 57, or Senior's Lectures on the Tra**>
mission of the Precious Metals, &c.t 2d ed., p. 78.

SYSTEM OF NATURAL LIBERTY. 147

manuals founded on it, especially that of Fawcett, the source
from which most of our contemporaries in these countries
have derived their knowledge of the science. But there are
other and deeper reasons, as we shall see, which make him, in
this as in other departments of knowledge, a specially interest-
ing and significant figure

InjiJS^he published five Essays on some Unsettled Ques-
tions of Political Economy, which had been written as early
as 1829 and 1830, but had, with the exception of the fifth,
remained in manuscript. In these essays is contained any
dogmatic contribution which he can be regarded as having
made to the science. The subject of the first is the laws *
of interchange between nations. He shows that, when two
countries trade together in two commodities, the prices of the
commodities exchanged on both sides (which, as Ricardo had
proved, are not determined by cost of production) will adjust
themselves, through the play of reciprocal demand, in such a
way that the quantities required by each country of the article
which it imports from its neighbour shall be exactly sufficient
tc pay for one another. This is the law which appears, with
some added developments, in his systematic treatise under
the name of the "equation of international demand." He
then discusses the division of the gains. The most important
practical conclusion (not, however, by any means an undis-
puted one) at which he arrives in this essay is, that tljff
relaxation of duties on foreign commodities, not operating as
protection but maintained solely for revenue, should be made
contingent on the adoption of some corresponding degree of
freedom of trade with England by the nation from which the
commodities are imported. In the second. essay, on the in- 'j
fiuence of consumption on production, the most interesting
results arrived at are the propositions — (i) that absenteeism
is^a local, not a national, evil and (2) that^, whilst there
cannot be permanent excess of production, there may be a
temporary excess, not only of any one article, but of com-
modities generally, — this last, however, not arising from over-

.-.-•--.-...__ w

I48 POLITICAL ECONOMY.

production, but from a want of commercial confidence. Th«
jtt, third essay relates to the use of the words " productive " and
" unproductive " as applied to labour, to consumption, and
VI to expenditure. The fourth deals with profits and interest,
especially explaining and so justifying Ricardo's theorem that
" profits depend on wages, rising as wages fall and falling as
wages rise." j What Ricardo meant was that profits depend
on the coafof wages estimated in labour. Hence improve-
ments in the production of articles habitually consumed by
the labourer may increase profits without diminishing the real
V remuneration of the labourer. The last essay is on the de-
finition and method of political economy, a subject later and
more maturely treated in the author's System of Logic.

Tn TfiflflMflkpnhliahftd his Principles of Political Economy,
with some of their Applications to Social Philosophy. This
title, though, as we shall see, open to criticism, indicated on
the part of the author a less narrow and formal conception of
the field of the science than had been common amongst hia
predecessors. He aimed, in fact, at producing a work which
might replace in ordinary use the Wealth of Nations, which
in his opinion was " in many parts obsolete and in all im-
perfect." Adam Smith had invariably associated the general
principles of the subject with their applications, and in
treating those applications had often appealed to other and
far larger considerations than pure political economy affords.
And in the same spirit Mill desired, whilst incorporating
all the results arrived at in the special science by Smith's
successors, to exhibit purely economic phenomena in relation
to the most advanced conceptions of his own time on the general
philosophy of society, as Smith had done in reference to the
philosophy of the eighteenth century.1

1 Curiously, in an otherwise well-executed abridgment of Mill's work
published in the United States (1886) by J. Laurence Laughlin, as a
text-book for colleges, all that "should properly be classed under the
head of Sociology " has been omitted, Mill's own conception being thus
set aside, and his book made to conform to the common type.

SYSTEM OF NATURAL LIBERTY. 149

This design he certainly failed to realise. His book is very
fai indeed from being a " modern Adam Smith." It is an
admirably lucid and even elegant exposition of the Kicardian
economics, the Malthusian theory being of course incorporated
with these, but, notwithstanding the introduction of many
minor novelties, it is, in its scientific substance, little or
nothing more. When Cliffe Leslie says that Mill so qualified
and amended the doctrines of Bicardo that the latter could
scarcely have recognised them, he certainly goes a great deal
too far: Senior really did more in that direction. Mill's
effort is usually to vindicate his master where others have
censured him, and to palliate his admitted laxities of expres-
sion. Already his profound esteem for Ricardo's services to
economics had been manifest in his Essays, where he says of
him, with some injustice to Smith, that, " having a science to
create," he could not " occupy himself with more than the
leading principles," and adds that " no one who has thoroughly
entered into his discoveries " will find any difficulty in work-
ing out " even the minutiae of the science." James Mill, too,
had been essentially an expounder of Ricardo ; and the son,
whilst greatly superior to his father in the attractiveness of
his expository style, is, in regard to his economic doctrine,
substantially at the same point of view. It is in their general
philosophical conceptions and their views of social aims and
ideals that the elder and younger Mill occupy quite different
positions in the line of progress. The latter could not, for
example, in his adult period have put forward as a theory of
government the shallow sophistries which the plain good sense
of Macaulay sufficed to expose in the writings of the former;
and he had a nobleness of feeling which, in relation to the
higher social questions, raised him far above the ordinary
coarse utilitarianism of the Benthamites.

The larger and more philosophic spirit in which Mill dealt
with social subjects was undoubtedly in flreat measure dua
to the influence of Comte^ to whom, as Bain justly says, he
igations than he himself was disposed

150 POLITICAL ECONOMY.

to admit. Had he more completely undergone that influence,
we are sometimes tempted to think he might have wrought
the reform in economics which still remains to be achieved,
emancipating the science from the a priori system, and
founding a genuine theory of industrial life on observation
in the broadest sense. But probably the time was not ripe
for such a construction, and it is possible that Mill's native
intellectual defects might have made him unfit for the task,
for, as Roscher has said, " ein historischer Kopf war er nicht."'
However this might have been, the effects of his early train-
ing, in which positive were largely alloyed with metaphysical
elements, sufficed in fact to prevent his attaining a perfectly
normal mental attitude. He never altogether overcame the
vicious direction which he had received from the teaching
of his father, and the influence of the Benthamite group in
which he was brought up. Hence it was that, according to
the striking expression of Roscher, his whole view of life was
"zu wenig aus Einem Gusse." The incongruous mixture of
the narrow dogmas of his youthful period with the larger
ideas of a later stage gave a wavering and indeterminate
character to his entire philosophy. He is, on every side,
eminently " un-final ; " he represents tendencies to new forms
of opinion, and opens new vistas in various directions, but
founds jcarcely anything, and remains indeed, so far as his
own position is concerned, not merely incomplete but inco-
herent.1 It is, however, precisely this dubious position which
seems to us to give a special interest to his career, by fitting
him in a peculiar degree to prepare and facilitate transitions.

What he himself thought to be " the chief merit of his
treatise " w.as the marked distinction drawn between the
theory of production and that^ of distribution, the laws of

1 Mr. John Morley ("Mill on Religion," in Critical Miscellanies, 2d
ser., 1877) betrays something like consternation at finding in Mill's
posthumous writings statements of opinion distinctly at variance with
philosophic doctrine* he had energetically maintained during his whole
life.

SYSTEM OF NATURAL LIBERTY. 151

the farmer being based on unalterable ymtm-flJ facfo whilst
the course of distribution is modiiie T to time

by the changing ordinances of society. This distinction, we
may remark, must not be too absolutely stated, for the
organisation of production changes with social growth, and,
a« Lauderdale long ago showed, the nature of the distribution
in a community reacts on production. But there is a sub-
stantial truth in the distinction, and the recognition of it tends
to concentrate attention on the question — Hojy can we im«
prove the existing distribution of wealth 1 The study of this
problem led Mill, as he advanced in years, further and further
in the direction of socialism ; and, whilst to the end of his
life his book, however otherwise altered, continued to deduce
the Ricardian doctrines from the principle of enlightened
selfishness, he was looking forward to an order of things in
which synergy should be founded on sympathy.

The gradual modification of his views in relation to the
economic constitution of society is set forth in his Auto-
biography. In his earlier days, he tells us, he "had seen
little further than the old school" (note this significant
title) "of political economy into the possibilities of funda-
mental improvement in social arrangements. Private pro-
perty, as now understood, and inheritance appeared the
-dernier mot of legislation." The notion of proceeding to any
radical redress of the injustice "involved in the fact that
some are born to riches and the vast majority to poverty "
he had then reckoned chimerical But now his views were
such as would " class him decidedly under the general designa-
tion of socialist ; " he had been led to believe that the whole
contemporary framework of economic life was merely tem-
porary and provisional, and that a time would come when
" the division of the produce of labour, instead of depending,
as in so great a degree it now does, on the accident of birth,
would be made by concert on an acknowledged principle of
justice." "The social problem of the future "he considered
to be " how to unite the greatest individual liberty of action,"

152 POLITICAL ECONOMY.

which was often compromised in socialistic schemes, "with
a common ownership in the raw material of the globe, and
an equal participation in all the benefits of combined labour."
These ideas, he says, were scarcely indicated in the first edition
of the Political Economy, rather more clearly and fully in the
second, and quite unequivocally in the third, — the French
Revolution of 1848 having made the public more open to the
reception of novelties in opinion.

Whilst thus looking forward to a new economic order,
he yet thinks its advent very remote, and believes that the
inducements of private interest will in the meantime be in-
dispensable.1 On the spiritual side he maintains a similar
attitude of expectancy, ne anticipates tne ultimate disap-
pearance of theism^ and the substitution of a purely human
religion, but believes that the existing doctrine will long be
necessary as a stimulus and a control. He thus saps existing
foundations without providing anything to take their place,
and maintains the necessity of conserving for indefinite periods
what he has radically discredited. Nay, even whilst sowing
the seeds of change in the direction of a socialistic organisation
of society, he favours present or proximate arrangements which
would urge the industrial world towards other issues. The
system of peasant proprietorship of land is distinctly indi-
vidualistic in its whole tendency ; yet he extravagantly praises
it in the earlier part of his book, only receding from that
laudation when he comes to the chapter on the future of the
labouring classes. And the system of so-called co-operation in
production which he so warmly commended in the later edi-
tions of his work, and led some of his followers to preach as
the one thing needful, would inevitably strengthen the principle
of personal property, and, whilst professing at most to sub-
stitute the competition of associations for that of individuals,
would by no means exclude the latter.

The elevation of the working classes he bound up too

1 See also bis Chapter* on Socialism, in Fortnightly R^vifwt 1879.

SYSTEM OF NATURAL LIBERTY. 153

exclusively with the Malthusian ethics, on which he laid quite
an extravagant stress, though, as Bain has observed, it is
not easy to make out his exact views, any more than his
father's, on this subject. We have no reason to think that hp
ever changed his opinion as to the necessity nf a.

population; yet that element seems foreign to the socialistic
idea to which he increasingly leaned. It is at least difficult
to see how, apart from individual responsibility for the sup-
port of a family, what Malthus called moral restraint could
be adequately enforced. This difficulty is indeed the fatal
flaw which, in Malthus's own opinion, vitiated the scheme of
Godwin.

Mill's openness to new ideas and his enthusiasm for im-
provement cannot be too much admired. But there appears
to have been combined with these fine traits in his mental
constitution a certain want of practical sense, a failure to
recognise and acquiesce in the necessary conditions of human
life, and a craving for " better bread than can be made of
wheat/' He entertained strarp^ly f.YSfrgpmt-.Pfl or T^P.^ pay-
verted, notions of the " subjection." the capacities1 and th.e
rights of women. He en courages a spirit of revolt on the part
of working men against their perpetual condemnation, as a
class, to the lot of living by wages, without giving satisfactory
proof that this state of things is capable of change, and with-
out showing that such a lot, duly regulated by law and
morality, is inconsistent with their real happiness. He also
insists on the "independence" of the working class — which,
according to him, fard, da se — in such a way as to obscure, if
not to controvert, the truths that superior rank and wealth are
naturally invested with social power, and are bound in duty
to exercise it for the benefit of the community at large, and
especially of its less favoured members. And he attaches a
quite undue importance to mechanical and, indeed, illusory
expedients, such as the limitation of the power of bequest and
the confiscation of the "unearned increment" of rent.

With respeci to economic method also, he shifted his post-

154 POLITICAL ECONOMY.

tion ; yet to the end occupied uncertain ground. In the fifth
of his early essays he asserted that the method a priori is the
only mode of investigation in the social sciences, and that the
method a posteriori " is altogether inefficacious in those sciences,
as a means of arriving at any considerable body of valuable
truth." When he wrote his Logic, he had learned from
Comte that the a posteriori method — in the form which he
chose to call " in verse deduction" — was the only mode of
arriving at truth in general sociology ; and his admission of
this at once renders the essay obsolete. But, unwilling to
relinquish the a priori method of his youth, he tries to estab-
lish a distinction of two sorts of economic inquiry, one of
which, though not the other, can be handled by that method.
Sometimes he speaks of political economy as a department
" carved out of the general body of the science of society ; "
whilst on the other hand the title of his systematic work im-
plies a doubt whether political economy is a part of " social
philosophy ** at all, and not rather a study preparatory and
auxiliary to it. Thus, on the logical as well as the dogmatic
side, he halts between two opinions. Notwithstanding his
misgivings and even disclaimers, he yet remained, as to method,
a member of the old school, and never passed into the new or
" historical " school, to which the future belongs.
* The question of economic method was also taken up by the
ablest of his disciples, John Elliott Cairnes (1824-75), who
devoted a volume to the subject (Logical Method of Political
Economy, 1857 ; 2d ed., 1875). Professor Walker has spoken
of the method advocated by Cairnes as being different from
that put forward by Mill, and has even represented the former
as similar to, if not identical with, that of the German his-
torical school. But this is certainly an error. Cairnes, not-
withstanding some apparent vacillation of view and certain
concessions more formal than real, maintains the utmost rigour
of the deductive method ; he distinctly affirms that in political
economy there is no room for induction at all, " the economist
starting with a knowledge of ultimate causes," and being thus,

SYSTEM OF NATURAL LIBERTY. 155

"at the outset of his enterprise, at the position which the
physicist only attains after ages of laborious research." He
does not, indeed, seem to be advanced beyond the point of
view of Senior, who professed to deduce all economic truth
from four elementary propositions. Whilst Mill in his Logic
represents verification as an essential part of the process of
demonstration of economic laws, Cairnes holds that, as they
"are not assertions respecting the character or sequence of
phenomena " (though what else can a scientific law be ?), " they
can neither be established nor refuted by statistical or docu-
mentary evidence." A proposition which affirms nothing re-
specting phenomena cannot be controlled by being confronted
with phenomena. Notwithstanding the unquestionable ability
of his book, it appears to mark, in some respects, a retro-
gression in methodology, and can for the future possess only
an historical interest.

Regarded in that light, the labours of Mill and Cairnes on
the method of the science, though intrinsically unsound, had
an important negative effect. They let down the old political
economy from its traditional position, and reduced its extra-
vagant pretensions by two modifications of commonly accepted
views. First, whilst Rieardo had never doubted that in all his
reasonings he was dealing with human beings as they actually
exist, they showed that the science, as he conceived it, must be
regarded as a purely hypothetic one. Its deductions are based
on unreal, or at least one-sided, assumptions, the most essential of
which is that of the existence of the so-called " economic man,"
a being who is influenced by two motives only, that of ac-
quiring wealth and that of avoiding exertion ; and only so far
as the premises framed on this conception correspond with fact
ean the conclusions be depended on in practice. Senior in
vain protested against such a view of the science, which, as he
saw, compromised its social efficacy ; whilst Torrens, who had
previously combated the doctrines of Rieardo, hailed Mill's
new presentation of political economy as enabling him, whilst
in one sense rejecting those doctrines, in another sense to

156 POLITICAL ECONOMY.

accept them. Secondly, beside economic science, it had often
been said, stands an economic art, — the former ascertaining
truths respecting the laws of economic phenomena, the latter
prescribing the right kind of economic action ; and many had
assumed that, the former being given, the latter is also in our
possession — that, in fact, we have only to convert theorems
into precepts, and the work is done. But Mill and Cairnes
made it plain that this statement could not be accepted, that
action can no more in the economic world than in any other
province of life be regulated by considerations borrowed from
one department of things only; that economics can suggest
ideas which are to be kept in view, but that, standing alone,
it cannot direct conduct — an office for which a wider prospect
of human affairs is required. This matter is best elucidated
by a reference to Comte's classification, or rather hierarchical
arrangement, of the sciences. Beginning with the least com-
plex, mathematics, we rise successively to astronomy, physics,
chemistry, thence to biology, and from it again to sociology.
In the course of this ascent we come upon all the great
laws which regulate the phenomena of the inorganic world,
of organised beings, and of society. A further step, however,
remains to be taken — namely, to morals; and at this point
the provinces of theory and practice tend to coincide, because
every element of conduct has to be considered in relation
to the general good. In the final synthesis all the previous
analyses have to be used as instrumental, in order to determine
how every real quality of things or men may be made to
converge to the welfare of Humanity.

Cairnes's most important economic publication was his last,
entitled Some Leading Principles of Political Economy newly
Expounded, 1874. In this work, which does not profess to
be a complete treatise on the science, he criticises and emends
the statements which preceding writers had given of some of
its principal doctrines, and treats elaborately of the limitations
with which they are to be understood, and the exceptions to
them which may be produced by special circumstances. Whilst

SYSTEM OF NATURAL LIBERTY. 157

marked by great ability, it affords evidence of what has been
justly observed as a weakness in Cairnes's mental constitution
— his " deficiency in intellectual sympathy," and consequent
frequent inability to see more than one side of a truth.

The three divisions of the book relate respectively to (i)
value, (2) labour and capital, and (3) international trade. In
the first he begins by elucidating the meaning of the word
" value," and under this head controverts the view of Jevons
that the exchange value of anything depends entirely on its
utility, without, perhaps, distinctly apprehending what Jevons
meant by this proposition. On supply and demand he shows,
as Say had done before, that these, regarded as aggregates, are
not independent, but strictly connected and mutually depen-
dent phenomena — identical, indeed, under a system of barter,
but, under a money system, conceivable as distinct. Supply
and demand with respect to particular commodities must be
understood to mean supply and demand at a given price ; and
thus we are introduced to the ideas of market price and normal
price (as, following Oherbuliez, he terms what Smith less
happily called natural price). Normal price again leads to the
consideration of cost of production, and here, against Mill and
others, he denies that profit and wages enter into cost of pro-
duction; in other words, he asserts what Senior (whom he
does not name) had said before him, though he had not con-
sistently carried out the nomenclature, that cost of production
is the sum of labour and abstinence necessary to production,
wages and profits being the remuneration of sacrifice and
not elements of it. But, it may well be asked, How can an
amount of labour be added to an amount of abstinence ? Must
not wages and profits be taken as " measures of cost " 1 By
adhering to the conception of "sacrifice," he exposes the
emptiness of the assertion that " dear labour is the great
obstacle to the extension of British trade " — a sentence in
which " British trade " means capitalists' profits. At this
point we are introduced to a doctrine now first elaborated,
though there are indications of it in Mill, of whose theory of

158 POLITICAL ECONOMY.

international values it is in fact an extension. In foreign
trade cost of production, in Cairnes's sense, does not regu-
late values, because it cannot perform that function except
under a regime of effective competition, and between different
countries effective competition does not exist. But, Cairnes asks,
to what extent does it exist in domestic industries? So far
as capital is concerned, he thinks the condition is sufficiently
fulfilled over the whole field — a position, let it be said in
passing, which he does not seem to make out, if we consider
the practical immobility of most invested, as distinct from
disposable, capital. But in the case of labour the requisite
competition takes place only within certain social, or rather
industrial, strata. The world of industry may be divided into
a series of superposed groups, and these groups are practically
" non-competing," the disposable labour in any one of them
being rarely capable of choosing its field in a higher.1 The
law that cost of production determines price cannot, therefore,
be absolutely stated respecting domestic any more than respect-
ing international exchange ; as it fails for the latter univer-
sally, so it fails for the former as between non-competing
groups. The law that holds between these is similar to that
governing international values, which may be called the equa-
tion of reciprocal demand. Such a state of relative prices will
establish itself amongst the products of these groups as shall
enable that portion of the products of each group which is
applied to the purchase of the products of all other groups
to discharge its liabilities towards those other groups. The
reciprocal demand of the groups determines the " average
relative level " of prices within each group ; whilst cost of

1 Economists are fond of comparing the rate of profit or wages in cue
nation (using this word in its economic sense) to a single fluid surface
which is continually disturbed by transient influences and continually
tending to recover its level. We must compare these rates in different
nations to reservoirs which, not communicating with each other, stand
always at different, though variable, levels. And the latter comparison
will apply also to the rates (at least of wages) in different economic
" groups," or strata, within the same community.

SYSTEM OF NATURAL LIBERTY. 159

production regulates the distribution of price among the
individual products of each group. This theorem is perhaps
of no great practical value ; but the tendency of the whole
investigation is to attenuate the importance of cost of pro-
duction as a regulator of normal price, and so to show that
yet >nother of the accepted doctrines of the science had been
propounded in too rigid and absolute a form. As to market
price, the formula by which Mill had defined it as the price
which equalises demand and supply Cairnes shows to be an
identical proposition, and he defines it as the price which
most advantageously adjusts the existing supply to the exist-
ing demand pending the coming forward of fresh supplies from
the sources of production.

His second part is chiefly remarkable for his defence of
what is known as the wages fund doctrine, to which we
adverted when speaking of Senior.1 Mill had given up this
doctrine, having been convinced by Thornton that it was
erroneous; but Cairnes refused to follow his leader, who, as
he believes, ought not to have been convinced.2 After having
given what is certainly a fallacious reply to Longe's criticism
of the expression "average rate of wages," he proceeds to
vindicate the doctrine in question by the consideration that
the amount of a nation's wealth devoted at any time to the
payment of wages — if the character of the national industries
and the methods of production employed remain the same —
is in a definite relation to the amount of its general capital ;
the latter being given, the former is also given. In illus-
trating his view of the subject, he insists on the principle
('true in the main, but too absolutely formulated by Mill) that
"demand for commodities is not demand for labour." It is
not necessary here to follow his investigation, for his reason-
ing has not satisfied his successors, with the exception of

1 See p. 139.

2 Jevons strangely says, in the Preface to his Theory of Political
Economy, 2d ed., that the wages fund doctrine "has been abandoned
by most English economists owing to the attacks," amongst others, " of
Cairnes." Cairnes was, in truth, a supporter of the doctrine.

160 POLITICAL ECONOMY.

Fawcett, and the question of wages is now commonly treated
without reference to a supposed determinate wages fund.
Cairnes next studies trades-unionism in relation to wages, and
arrives in substance at the conclusion that the only way in
which it can affect their rate is by accelerating an advance which
must ultimately have taken place independently of its action.
He also takes occasion to refute Mr. (now Lord) Brassey'a
supposed law of a uniform cost of labour in every part of
the world. Turning to consider the material prospects of the
working classes, he examines the question of the changes
which may be expected in the amount and partition of the
fund out of which abstinence and labour are remunerated.
He here enunciates the principle (which had been, however,
stated before him by Eicardo and Senior) that the increased
productiveness of industry will not affect either profit or wages
unless it cheapen the commodities which the labourer con-
sumes. These latter being mostly commodities of which raw
produce is the only or principal element, their cost of produc-
tion, notwithstanding improvements in knowledge and art,
will increase unless the numbers of the labouring class be
steadily kept in check ; and hence the possibility of elevating
the condition of the labourer is confined within very narrow
limits, if he continues to be a labourer only. The condition
of any substantial and permanent improvement in his lot is
that he should cease to be a mere labourer — that profits should
be brought to reinforce the wages fund, which has a tendency,
in the course of industrial progress, to decline relatively to the
general capital of a country. And hence Cairnes — abandon-
ing the purely theoretic attitude which he elsewhere represents
as the only proper one for the economist — recommends the
system of so-called co-operation (that is, in fact, the abolition of
the large capitalist) as offering to the working classes "the sole
means of escape from a harsh and hopeless destiny," and puts
aside rather contemptuously the opposition of the Positivista
to this solution, which yet many besides the Positivists, as,
for example, Leslie and F. A. Walker, regard as chimerical.

SYSTEM OF NATURAL LIBERTY. 161

The third part is devoted mainly to an exposition of Kicardo's
doctrine of the conditions of international trade and Mill's
theory of international values. The former Cairnes modifies
by introducing his idea of the partial influence of reciprocal
demand, as distinguished from cost of production, on the regu-
lation of domestic prices, and founds on this rectification an
interesting account of the connection between the wages pre-
vailing in a country and the character and course of its ex-
ternal trade. He emends Mill's statement, which represented
the produce of a country as exchanging for that of other coun-
tries at such values " as are required in order that the whole
of her exports may exactly pay for the whole of her imports "
by substituting for the latter phrase the condition that each
country should by means of her exports discharge all her
foreign liabilities — in other words, by introducing the consi-
deration of the balance of debts. This idea was not new;
it had been indicated by John Leslie Foster as early as I804,1
and was touched on by Mill himself ; but Cairnes expounds it
well ; and it is important as clearing away common misconcep-
tions, and sometimes removing groundless alarms.2 Passing
to the question of free trade, he disposes of some often-repeated
protectionist arguments, and in particular refutes the American
allegation of the inability of the highly-paid labour of that
country to compete with the "pauper labour" of Europe.
He is not so successful in meeting the " political argument,"
founded on the admitted importance for civilisation of develop-
ing diversified national industries ; and he meets only by one
of the highly questionable commonplaces of the doctrinaire
economists Mill's proposition that protection may foster nascent
industries really adapted to a country till they have struck
root and are able to endure the stress of foreign competition.

We have dwelt at some length on this work of Cairnes,
not only because it presents the latest forms of several accepted

1 In his Essay on the Principle of Commercial Exchanges.
1 On this whole subject see Professor C. F. Bastable'a Theory of Inter-
national Trade, 1887.

L

162 POLITICAL ECONOMY.

economic doctrines, but also because it is, and, we believe^
will remain, the last important product of the old English
school. The author at the outset expresses the hope that it
will strengthen, and add consistence to, the scientific fabric
" built up by the labours of Adam Smith, Malthus, Kicardo,
and Mill." Whilst recognising with him the great merits
of Smith, and the real abilities and services of his three
successors here named, we cannot entertain the same opinion
as Cairnes respecting the permanence of the fabric they con-
structed. We hold that a new edifice is required, incorporating
indeed many of the materials of the old, but planned on dif-
ferent ideas and in some respects with a view to different ends
— above all, resting on different philosophic foundations, and
having relation in its whole design to the more comprehensive
structure of which it will form but one department, namely,
the general science of society.

Cairnes' Slave Power (1862) was the most valuable
work which appeared on the subject of the great American
conflict.

FRANCE.

All the later European schools presuppose — in part adopting,
in part criticising— the work of the English economists from
Smith 1 to Kicardo and the Epigoni. The German school has
had in a greater degree than any other a movement of its own

1 The first Trench translation of the Wealth of Nations, by Blavet,
appeared in the Journal de I' Agriculture, du Commerce, des Finances, et
des Arts, 1779-80 ; new editions of it were published in 1781, 1788, and
1800 ; it was also printed at Amsterdam in 1784. Smith himself recom-
mended it in his third edition of the original as excellent. In 1790
appeared the translation by Roucher, to which Condorcet had intended
to add notes, and in 1802 that by Count Germain Gamier, executed
during his exile in England, which is now considered the standard ver-
sion, and has been reproduced, with notes by Say, Sismondi, Blanqui,
&c., in the Collection des Principaux jZconomisteg.

SYSTEM OF NATURAL LIBERTY. 163

— following, at least in its more recent period, an original
method, and tending to special and characteristic conclusions.
The French school, on the other hand, — if we omit the
socialists, who do not here come under consideration, — has
in the main reproduced the doctrines of the leading English
thinkers, — stopping short, however, in general of the extremes
of Ricardo and his disciples. In the field of exposition the
French are unrivalled ; and in political economy they have
produced a series of more or less remarkable systematic trea-
tises, text books, and compendiums, at the head of which
stands the celebrated work of J._B.jSay. But the number
of seminal minds which have appeared in French economic
literature — of writers who have contributed important truths,
introduced improvements of method, or presented the phe-
nomena under new lights — has not been large. Sisjnondi,
Dunoyer, and Bastiat will deserve our attention, as being the
most important of those who occupy independent positions
(whether permanently tenable or not), if we pass ovei for the
present the great philosophical renovation of Auguste Cojnte,
which comprehended actually or potentially all the branches
of sociological inquiry. Before estimating the labours of
Bastiat, we shall find it desirable to examine the views of
Carey, the most renowned of American economists, with which
the latest teachings of the ingenious and eloquent Frenchman
are, up to a certain point, in remarkable agreement. Cournot,
too, must find a place among the French writers of this period,
as the chief representative of the conception of a mathematical
method in political economy.

Of Jean Baptiste Say (1767-1832) Kicardo says — "He was
the first, or among the first, of Continental writers who justly
appreciated and applied the principles of Smith, and has
done more than all other Continental writers taken together
to recommend that enlightened and beneficial system to the
nations of Europe." The Wealth of Nations in the original
language was placed in Say's hands by Claviere, afterwards
minister, then director of the assurance society of which

164 POLITICAL ECONOMY.

Say was a clerk ; and the book made a powerful impression
on him. Long afterwards, when Dupont de Nemours com«
plained of his injustice to the physiocrats, and claimed him as,
through Smith, a spiritual grandson of Quesnay and nephew
of Turgot, he replied that he had learned to read in the
writings of the mercantile school, had learned to think in those
of Quesnay and his followers, but that it was in Smith that
he had learned to seek the causes and the effects of social
phenomena in the nature of things, and to arrive at this last
by a scrupulous analysis. His Traite d'ficonomie Politique
(1803) was essentially founded on Smith's work, but he aimed
at arranging the materials in a more logical and instructive
order.1 He has the French art of easy and lucid exposition,
though his facility sometimes degenerates into superficiality ;
and hence his book became popular, both directly and through
translations obtained a wide circulation, and diffused rapidly
through the civilised world the doctrines of the master. Say's
knowledge of common life, says Eoscher, was equal to Smith's;
but he falls far below him in living insight into larger political
phenomena, and he carefully eschews historical and philoso-
phical explanations. He is sometimes strangely shallow, as
when he says that " the best tax is that smallest in amount."
He appears not to have much claim to the position of an
original thinker in political economy. Kicardo, indeed, speaks
of him as having " enriched the science, by several discussions,
original, accurate, and profound." "What he had specially in
view in using these words was what is, perhaps rather pre-
tentiously, called Say's theorie des debouches, with his con-
nected disproof of the possibility of a universal glut. The
theory amounts simply to this, that buying is also selling, and
that it is by producing that we are enabled to purchase the
products of others. Several distinguished economists, especially

1 He grossly exaggerated Smith's faults of method. Thus he says— •
"L'ouvrage de Smith n'est qu'un assemblage confus des principes lei
plus sains de I'^conomie politique ... son livre eat un vaste chaoi
(Tidies juste* " (Di»cour» Preliminaire).

SYSTEM OF NATURAL LIBERTY. 165

Malthus and Sismondi, in consequence chiefly of a misinter-
pretation of the phenomena of commercial crises, maintained
that there might be general over- supply or excess of all
commodities above the demand. This Say rightly denied.
A particular branch of production may, it must indeed be
admitted, exceed the existing capabilities of the market ; but,
if we remember that supply is demand, that commodities are
purchasing power, we cannot accept the doctrine of the possi-
bility of a universal glut without holding that we can have
too much of everything — that " all men can be so fully
provided with the precise articles they desire as to afford no
market for each other's superfluities." Whatever services,
however, Say may have rendered by original ideas on those or
other subjects, his great merit is certainly that of a propa-
gandist and popularises

The imperial police would not permit a second edition of
his work to be issued without the introduction of changes
which, with noble independence, he refused to make; and
that edition did not therefore appear till 1814. Three other
editions were published during the life of the author — in 1817,
1819, and 1826. In 1828 Say published a second treatise,
Cours complet d'Bconomie Politique pratique, which contained
the substance of his lectures at the Conservatoire des Arts et
Metiers and at the College de France. Whilst in his earlier
treatise he had kept within the narrow limits of strict econo-
mics, in his later work he enlarged the sphere of discussion,
introducing in particular many considerations respecting the
economic influence of social institutions.

Jean Charles L. Simonde de Sismondi (1773-1842), author
of the Histoire des Republiques Italiennes du moyen age,
represents in the economic field a protest, founded mainly
on humanitarian sentiment, against the dominant doctrines.
He wrote first a treatise De la Richesse Commerciale (1803),
in which he followed strictly the principles of Adam Smith.
But he afterwards came to regard these principles as insuffi-
cient and requiring modification. He contributed an article OD

1 66 POLITICAL ECONOMY.

political economy to the Edinburgh Encyclopcedia, in which
his new views were partially indicated. They were fully de-
veloped in his principal economic work, Nouveaux Principe*
d'JZconomie Politique, ou de la Richesse dans ses rapports avec
la Population (1819 ; 2d ed., 1827). This work, as he tells
us, was not received with favour hy economists, a fact which
he explains by the consideration that he had " attacked an
orthodoxy — an enterprise dangerous in philosophy as in reli-
gion." According to his view, the science, as commonly
understood, was too much of a mere chrematistic : it studied
too exclusively the means of increasing wealth, and not
sufficiently the use of this wealth for producing general
happiness. The practical system founded on it tended, as
he believed, not only to make the rich richer, but to make
the poor poorer and more dependent ; and he desired to fix
attention on the question of distribution as by far the most
important, especially in the social circumstances of recent
times.

The personal union in Sismondi of three nationalities, the
Italian, the French, and the Swiss, and his comprehensive
historical studies, gave him a special largeness of view ; and
he was filled with a noble sympathy for the suffering members
of society. He stands nearer to socialism than any other
French economist proper, but it is only in sentiment, not in
opinion, that he approximates to it ; he does not recommend
my socialistic scheme. On the contrary, he declares in a
memorable passage that, whilst he sees where justice lies, he
must confess himself unable to suggest the means of realising
it in practice ; the division of the fruits of industry between
those who are united in their production appears to him
vicious ; but it is, in his judgment, almost beyond human
power to conceive any system of property absolutely different
from that which is known to us by experience. He goes no
further than protesting, in view of the great evils which he
saw around him, against the doctrine of laisser faire, and
invoking, somewhat vaguely, the intervention of Governments

SYSTEM OF NATURAL LIBERTY. 167

to " regulate the progress of wealth " and to protect the weaker
members of the community.

His frank confession of impotence, far wiser and more
honourable than the suggestion of precipitate and dangerous
remedies, or of a recurrence to outworn mediaeval institutions,
has not affected the reputation of the work. A prejudice was
indeed eerly created against it in consequence of its partial
harmony of tone, though, as we have seen, not of policy, with
socialism, which was then beginning to show its strength, as
well as by the rude way in which his descriptions of the
modern industrial system, especially as it existed in England,
disturbed the complacent optimism of some members of the
•o- called orthodox school. These treated the book with ill-
disguised contempt, and Bastiat spoke of it as preaching an
economie politique d, rebours. But it has held its place in the
literature of the science, and is now even more interesting
than when it first appeared, because in our time there is a
more general disposition, instead of denying or glossing over
the serious evils of industrial society, to face and remove or at
least mitigate them. The laisser faire doctrine, too, has been
discredited in theory and abandoned in practice ; and we are
ready to admit Sismondi's view of the State as a power not
merely intrusted with the maintenance of peace, but charged
also with the mission of extending the benefits of the social
union and of modern progress as widely as possible through
all classes of the community. Yet the impression which his
treatise leaves behind it is a discouraging one ; and this be-
cause he regards as essentially evil many things which seem
to be the necessary results of the development of industry.
The growth of a wealthy capitalist class and of manufacture
on the great scale, the rise of a vast body of workers who live
by their labour alone, the extended application of machines,
large landed properties cultivated with the aid of the most
advanced appliances — all these he dislikes and deprecates ;
but they appear to be inevitable. The problem is, how to
regulate and moralise the system they imply; but we must

168 POLITICAL ECONOMY.

surely accept it in principle, unless we aim at a thorough
social revolution. Sismondi may be regarded as the precursoi
of the German economists known under the inexact desig-
nation of " Socialists of the Chair ; " but their writings are
much more hopeful and inspiring.

To the subject of population he devotes special care, as of
great importance for the welfare of the working classes. So
far as agriculturists are concerned, he thinks the system of
what he calls patriarchal exploitation, where the cultivator is
also proprietor, and is aided by his family in tilling the land
— a law of equal division among the natural heirs being
apparently presupposed — the one which is most efficacious in
preventing an undue increase of the population. The father
is, in such a case, able distinctly to estimate the resources
available for his children, and to determine the stage of sub-
division which would necessitate the descent of the family
from the material and social position it had previously occu-
pied. When children beyond this limit are born, they do not
marry, or they choose amongst their number one to continue
the race. This is the view which, adopted by J. S. Mill,
makes so great a figure in the too favourable presentation by
that writer of the system of peasant proprietors.

In no French economic writer is greater force or general
solidity of thought to be found than in Charles Dunoyer
(1786-1862), author of La Liberte du Travail (1845; the
substance of the first volume had appeared under a different
title in 1825), honourably known for his integrity and inde-
pendence under the regime of the Restoration. What makes
him of special importance in the history of the science is
his view of its philosophical constitution and method. With
respect to method, he strikes the keynote at the very outset
in the words " rechercher expe'rimentalement," and in profes-
sing to build on " les donnees de Pobservation et de l'expe"ri-
ence." He shows a marked tendency to widen economics
into a general science of society, expressly describing political
economy as having for its province the whole order of things

SYSTEM OF NATURAL LIBERTY. 169

which results from the exercise and development of the social
forces. This larger study is indeed better named Sociology ;
and economic studies are better regarded as forming one depart-
ment of it. But the essential circumstance is that, in Dunoyer's
treatment of his great subject, the widest intellectual, moral,
and political considerations are inseparably combined with
purely economic ideas. It must not be supposed that by
liberty, in the title of his work, is meant merely freedom
from legal restraint or administrative interference ; he uses it
to express whatever tends to give increased efficiency to labour.
He is thus led to discuss all the causes of human progress,
and to exhibit them in their historical working.

Treating, in the first part, of the influence of external con-
ditions, of race, and of culture on liberty in this wider sense,
he proceeds to divide all productive effort into two great
classes, according as the action is exercised on things or on
men, and censures the economists for having restricted their
attention to the former. He studies in his second and third
parts respectively the conditions of the efficiency of these
two forms of human exertion. In treating of economic life,
strictly so called, he introduces his fourfold division of material
industry, in part adopted by J. S. Mill, as " (i) extractive,
(2) voituriere, (3) manufacturiere, (4) agricole," a division
which is useful for physical economics, but will always, when
the larger social aspect of things is considered, be inferior
to the more commonly accepted one into agricultural, manu-
facturing, and commercial industry, banking being supposed
as common president and regulator. Dunoyer, having in view
only action on material objects, relegates banking, as well as
commerce proper, to the separate head of exchange, which,
along with association and gratuitous transmission (whether
inter vivos or mortis causa), he classes apart as being, not in-
dustries, in the same sense with the occupations named, but
yet functions essential to the social economy. The industries
which act on man he divides according as they occupy them-
selves with (i) the amelioration of our physical nature, (a)

170 POLITICAL ECONOMY.

the culture of our imagination and sentiments, (3) the edu»
cation of our intelligence, and (4) the improvement of oui
moral habits ; and he proceeds accordingly to study the social
offices of the physician, the artist, the educator, and the priest.
We meet in Dunoyer the ideas afterwards emphasised by
Bastiat that the real subjects of human exchange are services ;
that all value is due to human activity ; that the powers of
nature always render a gratuitous assistance to the labour of
man ; and that the rent of land is really a form of interest on
invested capital. Though he had disclaimed the task of a
practical adviser in the often-quoted sentence — " Je n'impose
rien ; je ne propose meme rien ; j'expose," he finds himself,
like all economists, unable to abstain from offering counsel.
And his policy is opposed to any state interference with in-
dustry. Indeed he preaches in its extreme rigour the laisser
faire doctrine, which he maintains principally on the ground
that the spontaneous efforts of the individual for the improve-
ment of his condition, by developing foresight, energy, and
perseverance, are the most efficient means of social culture.
But he certainly goes too far when he represents the action
of Governments as normally always repressive and never
directive. He was doubtless led into this exaggeration by
his opposition to the artificial organisations of labour proposed
by so many of his contemporaries, against which he had to
vindicate the principle of competition; but his criticism of
these schemes took, as Comte remarks, too absolute a character,
tending to the perpetual interdiction of a true systematisation
of industry.1

AMERICA.

At this point it will be convenient to turn aside and notice
the doctrines of the American economist Carey. Not much
had been done before him in the science by citizens of the
United States. Benjamin Franklin, otherwise of world-wide

1 The French economists are continued on page 175.

SYSTEM OF NATURAL LIBERTY. 171

renown, was author of a number of tracts, in most of which
he merely enforces practical lessons of industry and thrift,
but in some throws out interesting theoretic ideas. Thus,
fifty years before Smith, he suggested (as Petty, however, had
already done) human labour as the true measure of value
(Modest Inquiry into the Nature and Necessity of a Paper
Currency, 1721), and in his Observations concerning the In-
wtase of Mankind (1751) he expresses views akin to those of
Malthus. Alexander Hamilton, secretary of the treasury, in
1791 presented in his official capacity to the House of Repre-
sentatives of the United States a Report on the measures by
which home manufactures could be promoted.1 In this docu-
ment he gives a critical account of the theory of the subject,
represents Smith's system of free trade as possible in prac-
tice only if adopted by all nations simultaneously, ascribes
to manufactures a greater productiveness than to agriculture,
and seeks to refute the objections against the development
of the former in America founded on the want of capital, the
high rate of wages, and the low price of land. The conclusion
at which he arrives is that for the creation of American manu-
factures a system of moderate protective duties was necessary,
and he proceeds to describe the particular features of such a
system. There is some reason to believe that the German
economist List, of whom we shall speak hereafter, was in-
fluenced by Hamilton's work, having, during his exile from
his native country, resided in the United States.

Henry Charles Carey (1793-1879), son of an American
citizen who had emigrated from Ireland, represents a reaction
against the dispiriting character which the Smithian doctrines
had assumed in the hands of Malthus and Ricardo. His aim
was, whilst adhering to the individualistic economy, to place
it on a higher and surer basis, and fortify it against the
assaults of socialism, to which some of the Ricardian tenets
had exposed it. The most comprehensive as well as mature
exposition of his views is contained in his Principles of Social

1 Hamilton's Works, edited by H. C. Lodge, voL ill p. 294.

172 POLITICAL ECONOMY.

Science ( 1 859). Inspired with the optimistic sentiment natural
t) a young and rising nation with abundant undeveloped
resources and an unbounded outlook towards the future,
he seeks to show that there exists, independently of human
wills, a natural system of economic laws, which is essentially
beneficent, and of which the increasing prosperity of the
whole community, and especially of the working classes, is
the spontaneous result, — capable of being defeated only by
the ignorance or perversity of man resisting or impeding its
action. He rejects the Malthusian doctrine of population,
maintaining that numbers regulate themselves sufficiently in
every well-governed society, and that their pressure on sub-
sistence characterises the lower, not the more advanced, stages
of civilisation. He rightly denies the universal truth, for
all stages of cultivation, of the law of diminishing returns
from land. His fundamental theoretic position relates to the
antithesis of wealth and value.

Wealth had been by most economists confounded with the
sum of exchange values ; even Smith, though at first distin-
guishing them, afterwards allowed himself to fall into this
error. Ricardo had, indeed, pointed out the difference, but
only towards the end of his treatise, in the body of which value
alone is considered. The later English economists had tended
to regard their studies as conversant only with exchange ; so
far had this proceeded that Whately had proposed for the
science the name of Catallactics. When wealth is considered
as what it really is, the sum of useful products, we see that
it has its origin in external nature as supplying both materials
and physical forces, and in human labour as appropriating and
adapting those natural materials and forces. Nature gives
her assistance gratuitously ; labour is the sole foundation
of value. The less we can appropriate and employ natural
forces in any production the higher the value of the product,
but the less the addition to our wealth in proportion to the
labour expended. Wealth, in its true sense of the sum of
useful things, is the measure of the power we have acquired

SYSTEM OF NATURAL LIBERTY. 173

over nature, whilst the value of an object expresses the
resistance of nature which labour has to overcome in order
to produce the object. Wealth steadily increases in the
course of social progress; the exchange value of objects, on
the other hand, decreases. Human intellect and faculty of
social combination secure increased command over natural
powers, and use them, more largely in production, whilst less
labour is spent in achieving each result, and the value of the
product accordingly falls. The value of the article is not fixed
by its cost of production in the past ; what really determines
it is the cost which is necessary for its reproduction under the
present conditions of knowledge and skill. The dependence
of value on cost, so interpreted, Carey holds to be universally
true ; whilst Ricardo maintained it only with respect to objects
capable of indefinite multiplication, and in particular did not
regard it as applicable to the case of land. Ricardo saw in
the productive powers of land a free gift of nature which had
been monopolised by a certain number of persons, and which
became, with the increased demand for food, a larger and
larger value in the hands of its possessors. To this value,
however, as not being the result of labour, the owner, it might
be maintained, had no rightful claim; he could not justly
demand a payment for what was done by the " original and
indestructible powers of the soil." But Carey held that land,
as we are concerned with it in industrial life, is really an
instrument of production which has been formed as such by
man, and that its value is due to the labour expended on it
in the past, — though measured, not by the sum of that labour,
but by the labour necessary under existing conditions to bring
new land to the same stage of productiveness. He studies
the occupation and reclamation of land with peculiar advantage
as an American, for whom the traditions of first settlement
are living and fresh, and before whose eyes the process is
indeed still going on. The difficulties of adapting a primitive
soil to the work of yielding organic products for man's use
can be lightly estimated only by an inhabitant of a country

174 POLITICAL ECONOMY.

long under cultivation. It is, in Carey's view, the overcoming
of these difficulties by arduous and continued effort that entitles
the first occupier of land to his property in the soil. Its pre-
sent value forms a very small proportion of the cost expended
on it, because it represents only what would be required, with
the science and appliances of our time, to bring the land
from its primitive into its present state. Property in land is
therefore only a form of invested capital — a quantity of labour
or the fruits of labour permanently incorporated with the soil ;
for which, like any other capitalist, the owner is compensated
by a share of the produce. He is not rewarded for what is
done by the powers of nature, and society is in no sense
defrauded by his sole possession. The so-called Ricardian
theory of rent is a speculative fancy, contradicted by all
experience. Cultivation does not in fact, as that theory
supposes, begin with the best, and move downwards to the
poorer soils in the order of their inferiority.1 The light and
dry higher lands are first cultivated ; and only when popula-
tion has become dense and capital has accumulated, are the
low-lying lands, with their greater fertility, but also with their
morasses, inundations, and miasmas, attacked and brought into
occupation. Rent, regarded as a proportion of the produce,
sinks, like all interest on capital, in process of time, but, as an
absolute amount, increases. The share of the labourer increases,
both as a proportion and an absolute amount. And thus the
interests of these different social classes are in harmony.

But, Carey proceeds to say, in order that this harmonious
progress may be realised, what is taken from the land must
be given back to it. All the articles derived from it are
really separated parts of it, which must be restored on pain of
its exhaustion. Hence the producer and the consumer must
be close to each other ; the products must not be exported to
a foreign country in exchange for its manufactures, and thua
go to enrich as manure a foreign soil. In immediate exchange

1 It is, however, a mistake to suppose that the assumption of thi*
historical order of descent is essential to the theory in question.

SYSTEM OF NATURAL LIBERTY. 175

value the landowner may gain by such exportation, hut the
productive powers of the land will suffer. And thus Carey,
who had set out as an earnest advocate of free trade, arrives
at the doctrine of protection : the " co-ordinating power " in
society must intervene to prevent private advantage from
working public mischief.1 He attributes his conversion on
the question to his observation of the effects of liberal and
protective tariffs respectively on American prosperity This
observation, he says, threw him back on theory, and led him
to see that the intervention referred to might be necessary
to remove (as he phrases it) the obstacles to the progress
of younger communities created by the action of older and
wealthier nations. But it seems probable that the influence
of List's writings, added to his own deep-rooted and hereditary
jealousy and dislike of English predominance, had something
to do with his change of attitude.

The practical conclusion at which he thus arrived, though
it is by no means in contradiction to the doctrine of the
existence of natural economic laws, accords but ill with his
optimistic scheme; and another economist, Frederic Bastiat,
accepting his fundamental ideas, applied himself to remove the
foreign accretion, as he regarded it, and to preach the theory of
spontaneous social harmonies in relation with the practice of free
trade as its legitimate outcome.2

FRANCE — (Continued}.
Bastiat (1801-1850), though not a profound thinker, was

1 This argument seems scarcely met by Professor F. A. Walker, Political
Economy, 50-52. But perhaps he is right in thinking that Carey exagge-
rates the importance of the considerations on which it is founded. Mill
and Leslie remark that the transportation of agricultural products from
the western to the Atlantic States has the same effect as their export to
Europe, so far as this so-called " land-butchery ' is concerned ; besides,
some manures are obtainable from abroad.

* Other writings of Carey's besides his Social Science are his Essay on
tke Rate of Wages (1835) ? Principles of Political Economy (1838-1840) j
P<ut, Present, and Future (1848) ; Unity of Law (1872).

176 POLITICAL ECONOMY.

a brilliant and popular writer on economic questions. Though
he always had an inclination for such studies, he was first
impelled to the active propagation of his views by his earnest
sympathy with the English anti-corn-law agitation. Naturally
of an ardent temperament, he threw himself with zeal into the
free-trade controversy, through which he hoped to influence
French economic policy, and published in 1845 a history of the
struggle under the title of Cobden et la Ligue. In 1845-48
appeared his Sophismes ficonomiques (Eng. trans, by G. R.
Porter, 1849, an^ by P. J. Stirling, 1873), in which he exhibited
his best qualities of mind. Though Cairnes goes too far in
comparing this work with the Lettres Provinciales, it is cer-
tainly marked by much liveliness, point, and vigour. But to
expose the absurdities of the ordinary protectionism was no
difficult task ; it is only in such a form as the policy assumed
in the scheme of List, as purely provisional and preparatory,
that it deserves and demands consideration. After the revolu-
tion of 1848, which for a time put an end to the free-trade
movement in France, the efforts of Bastiat were directed
against the socialists. Besides several minor pieces possessing
the same sort of merit as the Sophismes, he produced, with
a view to this controversy, his most ambitious as well as
characteristic work, the Harmonies ficonomiques (Eng. trans,
by P. J. Stirling, 1860). Only the first volume was published ;
it appeared in 1850, and its author died in the same year.
Since then the notes and sketches which he had prepared as
materials towards the production of the second volume have
been given to the public in the collected edition of his
writings (by Paillottet, with Life by Fontenay, 7 vols.), and
we can thus gather what would have been the spirit and
substance of the later portions of the book.

It will always be historically interesting as the last incar-
nation of thorough-going economic optimism. This optimism,
recurring to its first origin, sets out from theological considera-
tions, and Bastiat is commended by his English translator for
treating political economy "in connection with final causes."

SYSTEM OF NATURAL LIBERTY. 177

The spirit of the work is to represent "all principles, all
motives, all springs of action, all interests, as co-operating
towards a grand final result which humanity will never reach,
but to which it will always increasingly tend, namely, the
indefinite approximation of all classes towards a level, which
steadily rises, — in other words, the equalisation of individuals
in the general amelioration."

What claimed to be novel and peculiar in his scheme was
principally his theory of value. Insisting on the idea that
value does not denote anything inherent in the objects to
which it is attributed, he endeavoured to show that it never
signifies anything but the ratio of two " services." This view
he develops with great variety and felicity of illustration.
Only the mutual services of human beings, according to him,
possess value and can claim a retribution ; the assistance given
by nature to the work of production is always purely gratui-
tous, and never enters into price. Economic progress, as, for
example, the improvement and larger use of machinery, tends
perpetually to transfer more and more of the elements of
utility from the domain of property, and therefore of value,
into that of community, or of universal and unpurchased
enjoyment It will be observed that this theory is substanti-
ally identical with Carey's, which had been earlier propounded;
and the latter author in so many words alleges it to have been
taken from him without acknowledgment. It has not perhaps
been sufficiently attended to that very similar views are found
in Dunoyer, of whose work Bastiat spoke as exercising a
powerful influence on " the restoration of the science," and
whom Fontenay, the biographer of Bastiat, tells us he recog-
nised as one of his misters, Charles Comte l being the other.

The mode which has just been explained of conceiving
industrial action and industrial progress is interesting and

1 Charles Comte (1782-1837) was son-in-law of J. B. Say. He was
associated with Dunoyer in his political writings and, like him, distin-
guished for his honourable independence. He was author of the Traiti
de Legislation, a meritorious and useful, but not a profound work.

M

178 POLITICAL ECONOMY.

instructive so far as it is really applicable, but it was andulj
generalised. Cairnes has well pointed out that Bastiat's
theoretic soundness was injuriously affected by his habit of
studying doctrines with a direct view to contemporary social
and political controversies. He was thus predisposed to
accept views which appeared to lend a sanction to legitimate
and valuable institutions, and to reject those which seemed to
him to lead to dangerous consequences. His constant aim
is, as he himself expressed it, to " break the weapons " of
anti-social reasoners " in their hands," and this preoccupation
interferes with the single-minded effort towards the attainment
of scientific truth. The creation or adoption of his theory of
value was inspired by the wish to meet the socialistic criticism
of property in land ; for the exigencies of this controversy it
was desirable to be able to show that nothing is ever paid for
except personal effort. His view of rent was, therefore, so to
speak, foreordained, though it may have been suggested, as
indeed the editor of his posthumous fragments admits, by the
writings of Carey. He held, with the American author, that
rent is purely the reward of the pains and expenditure of the
landlord or his predecessors in the process of converting the
natural soil into a, farm by clearing, draining, fencing, and the
other species of permanent improvements.1 He thus gets rid
of the (so-called) Ricardian doctrine, which was accepted by
the socialists, and by them used for the purpose of assailing
the institution of landed property, or, at least, of supporting a
claim of compensation to the community for the appropriation
of the land by the concession of the " right to labour." As
Cairnes has said,2 " what Bastiat did was this : having been
at infinite pains to exclude gratuitous gifts of nature from the
possible elements of value, and pointedly identified " [rather,
associated] " the phenomenon with ' human effort ' as its

1 M. Leroy-Beaulieu maintains (Essai stir la Repartition des Richesuct,
2d ed., 1882) that this, though not strictly, is approximately true — that
economic forms a very small part of actual rent.

8 Essays in Political Economy, p. 334.

SYSTEM OF NATURAL LIBERTY. 179

exclusive source, he designates human effort by the term
' service,' and then employs this terra to admit as sources of
value those very gratuitous natural gifts the exclusion of
which in this capacity constituted the essence of his doctrine."
The justice of this criticism will be apparent to any one who
considers the way in which Bastiat treats the question of the
value of a diamond. That what is paid for in most cases of
human dealings is effort no one can dispute. But it is surely
a reductio ad absurdum of his theory of value, regarded as a
doctrine of universal application, to represent the price of a
diamond which has been accidentally found as remuneration
for the effort of the finder in appropriating and transmitting
it. And, with respect to land, whilst a large part of rent, in
the popular sense, must be explained as interest on capital,
it is plain that the native powers of the soil are capable of
appropriation, and that then a price can be demanded and will
be paid for their use.

Bastiat is weak on the philosophical side ; he is filled with
the ideas of theological teleology, and is led by these ideas to
form a priori opinions of what existing facts and laws must
necessarily be. And the /MS naturce, which, like metaphysical
ideas generally, has its root in theology, is as much a postu-
late with him as with the physiocrats. Thus, in his essay
on Free Trade, he says : — " Exchange is a natural right like
property. Every citizen who has created or acquired a product
ought to have the option of either applying it immediately to
his own use or ceding it to whosoever on the surface of the
globe consents to give him in exchange the object of hig
desires." Something of the same sort had been said by
Turgot ; and in his time this way of regarding things was
excusable, and even provisionally useful; but in the middle
of the i Qth century it was time that it should be seen through
and abandoned.

Bastiat had a real enthusiasm for a science which he thought
destined to render great services to mankind, and he seems
to have believed intensely the doctrines which gave a special

i8o POLITICAL ECONOMY.

colour to his teaching. If his optimistic exaggerations favoured
the propertied classes, they certainly were not prompted by
self-interest or servility. But they are exaggerations; and,
amidst the modern conflicts of capital and labour, his per-
petual assertion of social harmonies is the cry of "peace,
peace," where there is no peace. The freedom of industry,
which he treated as a panacea, has undoubtedly brought with
it great benefits ; but a sufficient experience has shown that
it is inadequate to solve the social problem. How can the
advocates of economic revolution be met by assuring them
that everything in the natural economy is harmonious — that,
in fact, all they seek for already exists ? A certain degree of
spontaneous harmony does indeed exist, for society could not
continue without it, but it is imperfect and precarious ; the
question is, How can we give to it the maximum of complete-
ness and stability ?

Augustin Cournot (1801-1877) appears to have been the
first l who, with a competent knowledge of both subjects, en-
deavoured to apply mathematics to the treatment of economic
questions. His treatise entitled Recherches sur les Principes
Mathematiques de la Theorie des Richesses was published in
1838. He mentions in it only one previous enterprise of the
same kind (though there had in fact been others) — that,
namely, of Nicolas Fra^ois Canard, whose book, published
in 1802, was crowned by the Institute, though "its principles
were radically false as well as erroneously applied." Not-
withstanding Cournot's just reputation as a writer on mathe-
matics, the Recherches made little impression. The truth
seems to be that his results are in some cases of little import-
ance, in others of questionable correctness, and that, in the
abstractions to which he has recourse in order to facilitate his
calculations, an essential part of the real conditions of the
problem is sometimes omitted. His pages abound in symbols

l Hermann Heinrich Gossen'a work, EntwicTcelung der Gesetze det
menschlicfien Verkehra, so highly praised by Jevons, Theory of PoL ticon.,
ad ed., Pref., was published in 1854.

SYSTEM OF NATURAL LIBERTY. 181

representing unknown functions, the form of the function
being left to be ascertained by observation of facts, which he
does not regard as a part of his task, or only some known
properties of the undetermined function being used as bases
for deduction. Jevons includes in his list of works in which
a mathematical treatment of economics is adopted a second
treatise which Cournot published in 1863, with the title
Principes de la Theorie des Richesses. But in reality, in the
work so named, which is written with great ability, and con-
tains much forcible reasoning in opposition to the exaggera-
tions of the ordinary economists, the mathematical method is
abandoned, and there is not an algebraical formula in the book.
The author admits that the public has always shown a repug-
nance to the use of mathematical symbols in economic dis-
cussion, and, though he thinks they might be of service in
facilitating exposition, fixing the ideas, and suggesting further
developments, he acknowledges that a grave danger attends
their use. The danger, according to him, consists in the
probability that an undue value may be attached to the
abstract hypotheses from which the investigator sets out, and
which enable him to construct his formulae. And his practical
conclusion is that mathematical processes should be employed
only with great precaution, or even not employed at all if the
public judgment is against them, for "this judgment," he
says, " has its secret reasons, almost always more sure than
those which determine the opinions of individuals." It is an
obvious consideration that the acceptance of unsound or one-
sided abstract principles as the premises of argument does not
depend on the use of mathematical forms, though it is possible
that the employment of the latter may by association produce
an illusion in favour of the certainty of those premises. But
the great objection to the use of mathematics in economic
reasoning is that it is necessarily sterile. If we examine the
attempts which have been made to employ it, we shall find
that the fundamental conceptions on which the deductions
are made to rest are vague, indeed metaphysical, in their

182 POLITICAL ECONOMY.

character. Units of animal or moral satisfaction, of utility,
and the like, are as foreign to positive science as a unit oi
dormitive faculty would be ; and a unit of value, unless we
understand by value the quantity of one commodity exchange-
able under given conditions for another, is an equally indefinite
idea. Mathematics can indeed formulate ratios of exchange
when they have once been observed; but it cannot by any
process of its own determine those ratios, for quantitative
conclusions imply quantitative premises, and these are want-
ing. There is then no future for this kind of study, and it
is only waste of intellectual power to pursue it. But the im-
portance of mathematics as an educational introduction to all
the higher orders of research is not affected by this conclusion.
The study of the physical medium, or environment, in which
economic phenomena take place, and by which they are
affected, requires mathematics as an instrument ; and nothing
can ever dispense with the didactic efficacy of that science,
as supplying the primordial type of rational investigation,
giving the lively sentiment of decisive proof, and disinclining
the mind to illusory conceptions and sophistical combinations.
And a knowledge of at least the fundamental principles of
mathematics is necessary to economists to keep them right in
their statements of doctrine, and prevent their enunciating
propositions which have no definite meaning. Even dis-
tinguished writers sometimes betray a serious deficiency in
this respect ; thus they assert that one quantity " varies in-
versely as" another, when what is meant is that the sum
(not the product) of the two is constant ; and they treat as
capable of numerical estimation the amount of an aggregate
of elements which, differing in kind, cannot be reduced to a
common standard. As an example of the latter error, it may
be mentioned that " quantity of labour," so often spoken of
by Ricardo, and in fact made the basis of his system, includes
such various species of exertion as will not admit of summa-
tion or comparison.

SYSTEM OF NATURAL LIBERTY. 183

ITALY.

The first Italian translation of the Wealth of Nations
appeared in 1780. The most distinguished Italian economist
of the period here dealt with was, however, no disciple of
Smith. This was Melchiorre Gioja, author, besides statisti-
cal and other writings, of a voluminous work entitled Nuovo
Prospetto delle Scienze Economiche (6 vols., 1815-17; the
work was never completed), intended to be an encyclopaedia
of all that had been taught by theorists, enacted by Govern-
ments, or effected by populations in the field of public and
private economy. It is a learned and able treatise, but so
overladen with quotations and tables as to repel rather than
attract readers. Gioja admired the practical economic system
of England, and enlarges on the advantages of territorial proper-
ties, manufactures, and mercantile enterprises on the large as
opposed to the small scale. He defends a restrictive policy,
and insists on the necessity of the action of the state as a
guiding, supervising, and regulating power in the industrial
world. But he is in full sympathy with the sentiment of his
age against ecclesiastical domination and other mediaeval
survivals. We can but very briefly notice Romagnosi (d.
1835), who, by his contributions to periodical literature, and
by his personal teaching, greatly influenced the course of
economic thought in Italy ; Antonio Scialoja (Principii
d'Economia Sociale, 1840 ; and Carestia e Governo, 1853),
an able advocate of free trade (d. 1877); Luigi Cibrario, well
known as the author of Economia Politico, del media evo
(1839; 5th ed., 1861: French trans, by Barneaud, 1859),
which is in fact a view of the whole social system of that
period; Girolamo Boccardo (b. 1829; Trattato Teorico-pratico
di Economia Politica, 1853); the brilliant controversialist
Francesco Ferrara, professor at Turin from 1849 to 1858 (in
whose school most of the present Italian teachers of the science
were, directly or indirectly, educated), a partisan of the laisser
faire doctrine in its most extreme form, and an advocate of

i84 POLITICAL ECONOMY.

the peculiar opinions of Carey and Bastiat on the subject ol
rent ; and, lastly, the Neapolitan minister Ludovico Bianchini
(Principii della Scienza del Ben Vivere Saddle, 1845 an^ I^55)>
who is remarkable as having followed in some degree an
historical direction, and asserted the principle of relativitys
and who also dwelt on the relations of economics with morals,
by a due attention to which the Italian economists have,
indeed, in general been honourably distinguished.

SPAIN.

The Wealth of Nations was translated into Spanish by
J. A. Ortiz hi 1794. It may perhaps have influenced Gaspar
de Jovellanos, who in 1 795 presented to the council of Castile
and printed in the same year his celebrated Informe de la
Sociedad Economica de Madrid en expediente de Ley Agraria,
which was a powerful plea for reform, especially in taxation
and the laws affecting agriculture, including those relating to
the systems of entail and mortmain. An English version of
this memoir is given in the translation (1809) of Laborde's
Spain, voL iv.

GERMANY.

Roscher observes that Smith did not at first produce much
impression in Germany.1 He does not appear to have been
known to Frederick the Great ; he certainly exercised no in-
fluence on him. Nor did Joseph II. take notice of his work.
And of the minor German princes, Karl Friedrich of Baden,
as a physiocrat, would not be accessible to his doctrines. It
was otherwise in the generation whose principal activity be-
longs to the first decade of the igth century. The Prussian
statesmen who were grouped round Stein had been formed as

1 The first German version of the Wealth of Nations was that by Johann
Friedrich Schiller, published 1776-78. The second, which is the first
good one, was by Christian Garve (1794, and again 1799 anc^ 1810). A
Uter one by C. W. Asher (1861) is highly commended.

SYSTEM OF NATURAL LIBERTY. 185

economists by Smith, as had also Gentz, intellectually the
most important man of the Metternich regime in Austria.

The first German expositors of Smith who did more than
merely reproduce his opinions were Christian Jacob Kraus
(1753-1807), Georg Sartorius (1766-1828), and August Ferdi-
nand Liider (1760-1819). They contributed independent views
from different standpoints, — the first from that of the effect
of Smith's doctrine on practical government, the second from
that of its bearing on history, the third from that of its rela-
tion to statistics. Somewhat later came Gottlieb Hufeland
(1760-1817), Johann Friedrich Eusebius Lotz (1771—1838,)
and Ludwig Heinrich von Jakob (1759-1827), who, whilst
essentially of the school of Smith, apply themselves to a re-
vision of the fundamental conceptions of the science. These
authors did not exert anything like the wide influence of
Say, partly on account of the less attractive form of their
writings, but chiefly because Germany had not then, like
France, a European audience. Julius von Soden (1754-1831)
is largely founded on Smith, whom, however, he criticises
with undue severity, especially in regard to his form and
arrangement; the Wealth of Nations he describes as a series
of precious fragments, and censures Smith for the absence of
a comprehensive view of his whole subject, and also as one-
sidedly English in his tendencies.

The highest form of the Smithian doctrine in Germany
is represented by four distinguished names : — Karl Heinrich
Eau( 1792— 1870), Friedrich Nebenius (1784-1857), Friedrich
Benedict Wilhelm Hermann (1795-1868), and Johann Hein-
rich von Thiinen (1783-1850).

Tail's characteristic is " erudite thoroughness." His Lehr-
buch (1826-32) is an encyclopaedia of all that up to his time
had appeared in Germany under the several heads of Volks-
wirthschaftslehre, Volksivirtlischaftspolitilc, and Finanzwissen-
schaft. His book is rich in statistical observations, and is
particularly instructive on the economic effects of different
geographical conditions. It is well adapted for the teaching

1 86 POLITICAL ECONOMY.

of public servants whose duties are connected with economics,
and it was in fact the source from which the German official
world down to the seventies of the igth century derived its
knowledge of the science. In his earlier period Rau had
insisted on the necessity of a reform of economic doctrine
(Ansichten der Volkswirthschaft, 1821), and had tended towards
relativity and the historical method ; but he afterwards con-
ceived the mistaken notion that that method " only looked into
the past without studying the means of improving the present,"
and became himself purely practical in the narrower sense of
that word. He has the merit of having given a separate
treatment of Unternehmergewinn, or "wages of management."
Nebenius, minister in Baden, who was largely instrumental
in the foundation of the Zollverein, was author of a highly
esteemed monograph on public credit (1820). The Staats-
wrthschaftUche Untersuchungen (1832 ; 2d ed., 1870) of
Hermann do not form a regular system, but treat a series of
important special subjects. His rare technological knowledge
gave him a great advantage in dealing with some economic
questions. He reviewed the principal fundamental ideas of
the science with great thoroughness and acuteness. " His
strength," says Roscher, " lies in his clear, sharp, exhaustive
distinction between the several elements of a complex con-
ception, or the several steps comprehended in a complex act."
For keen analytical power his German brethren compare him
with Ricardo. But he avoids several one-sided views of
the English economist. Thus he places public spirit beside
egoism as an economic motor, regards price as not measured
by labour only but as a product of several factors, and habi-
tually contemplates the consumption of the labourer, not as
a part of the cost of production to the capitalist, but as
the main practical end of economics. Thiinen is known
principally by his remarkable work entitled Der Isolirte Staat
in Beziehung auf Landwirthschaft und Nationalokonomie
(1826; 3d ed., 1875). In this treatise, which is a classic in
the political economy of agriculture, there is a rare union of

SYSTEM OF NATURAL LIBERTY. 187

exact observation with creative imagination. With a view to
exhibit the natural development of agriculture, he imagines
a state, isolated from the rest of the world, circular in form
and of uniform fertility, without navigable rivers or canals, with
a single large city at its centre, which supplies it with manu-
factures and receives in exchange for them its food-products,
and proceeds to study the effect of distance from this central
market on the agricultural economy of the several concentric
spaces which compose the territory. The method, it will
be seen, is highly abstract, but, though it may not be fruit-
ful, it is quite legitimate. The author is under no illusion
blinding him to the unreality of the hypothetic case. The
supposition is necessary, in his view, in order to separate
and consider apart one essential condition — that, namely, of
situation with respect to the market. It was his intention
(imperfectly realised, however) to institute afterwards several
different hypotheses in relation to his isolated state, for the
purpose of similarly studying other conditions which in real
life are found in combination or conflict. The objection to
this method lies in the difficulty of the return from the
abstract study to the actual facts; and this is probably an
insuperable one in regard to most of its applications. The
investigation, however, leads to trustworthy conclusions as
to the conditions of the succession of different systems of land
economy. The book abounds in calculations relating to agri-
cultural expenditure and income, which diminish its interest
to the general reader, though they are considered valuable to
the specialist. They embody the results of the practical ex-
perience of the author on his estate of Tellow in Mecklenburg-
Schwerin. Thiinen was strongly impressed with the danger
of a violent conflict between the middle class and the
proletariate, and studied earnestly the question of wages,
which he was one of the first to regard habitually, not merely
as the price of the commodity labour, but as the means of
subsistence of the mass of the community. He arrived by
mathematical reasonings of some complexity at a formula

188 POLITICAL ECONOMY.

which expresses the amount of " natural wages " as
where a is the necessary expenditure of the labourer for
subsistence, and p is the product of his labour. To this
formula he attributed so much importance that he directed it
to be engraved on his tomb. It implies that wages ought to
rise with the amount of the product ; and this conclusion
led him to establish on his estate a system of participation by
the labourers in the profits of farming, of which some account
will be found in Mr. Sedley Taylor's Profit-sharing between
Capital and Labour (1884). Thiinen deserves more attention
than he has received in England; both as a man and as a
writer he was eminently interesting and original ; and there is
much in Der Isolirte Staat and his other works that is awaken-
ing and suggestive.

Eoscher recognises what he calls a Germane-Russian
(deutsch-russische) school of political economy, represented
principally by Heinrich Storch (1766-1825). Mercantilist
principles had been preached by a native (" autochthonen ")
economist, Ivan Possoschkoff, in the time of Peter the Great.
The new ideas of the Smithian system were introduced into
Russia by Christian Yon Schlozer (1774-1831) in his pro-
fessorial lectures and in his Anfangsgrilnde der Staatswirth-
schaft, oder die Lehre vom National-reichthume (1805-1807).
Storch was instructor in economic science of the future
emperor Nicholas and his brother the grand-duke Michael,
and the substance of his lessons to them is contained in his
Cours d'Jficonomie Folitique (1815). The translation of this
treatise into Russian was prevented by the censorship ; Rau
published a German version of it, with annotations, in 1819.
It is a work of a very high order of merit. The epithet
" deutsch-russisch " seems little applicable to Storch ; as
Roscher himself says, he follows mainly English and French
writers — Say, Sismondi, Turgot, Bentham, Steuart, and Hume,
but, above all, Adam Smith. His personal position (and the
same is true ,of Schlozer) led him to consider economic
doctrines in connection with a stage of culture different from

SYSTEM OF NATURAL LIBERTY. 189

that of the Western populations amongst which they had
been formulated ; this change of the point of view opened the
door to relativity, and helped to prepare the Historical method.
Storch's study of the economic and moral effects of serfdom
is regarded as especially valuable. The general subjects with
which he has particularly connected his name are (i) the
doctrine of immaterial commodities (or elements of national
prosperity), such as health, talent, morality, and the like ;
(2) the question of " productive " and " unproductive," as
characters of labour and of consumption, on which he dis-
agreed with Smith and may have furnished indications to
Dunoyer; and (3) the differences between the revenue of
nations and that of individuals, on which he follows Lauder-
dale and is opposed to Say. The latter economist having
published at Paris (1823) a new edition of Storch's Cours,
with criticisms sometimes offensive in tone, he published by
way of reply to some of Say's strictures what is considered
his ripest and scientifically most important work, Considera-
tions sur la nature du Revenu National (1824 ; translated ink
German by the author himself, 1825).

A distinct note of opposition to the Smithian economics was
sounded in Germany by two writers, who, setting out from
somewhat different points of view, animated by different
sentiments, and favouring different practical systems, yet, so
far as their criticisms are concerned, arrive at similar con-
clusions ; we mean Adam Miiller and Friedrich List.

Adam Miiller (1779-1829) was undoubtedly a man of real
genius. In his principal work Elements der Staatskunst
(1809), and his other writings, he represents a movement of
econDmic thought which was in relation with the (so-called)
Romantic literature of the period. The reaction against
Smithianism of which he was the coryphaeus was founded
on an attachment to the principles and social system of the
Middle Ages. It is possible that the political and historical
ideas which inspire him, his repugnance to contemporary
liberalism, and his notions of regular organic development,

190 POLITICAL ECONOMY.

especially in relation to England, were in some degree imbibed
from Edmund Burke, whose Reflections on the Revolution in
France had been translated into German by Friedrich Gentz,
the friend and teacher of Miiller. The association of his
criticisms with mediaeval prepossessions ought not to prevent
our recognising the elements of truth which they contain.

He protests against the doctrine of Smith and against
modern political economy in general on the ground that it
presents a mechanical, atomistic, and purely material con-
ception of society, that it reduces to nullity all moral forces
and ignores the necessity of a moral order, that it is at bottom
no more than a theory of private property and private interests,
and takes no account of the life of the people as a whole in
its national solidarity and historical continuity. Exclusive
attention, he complains, is devoted to the immediate production
of objects possessing exchange value and to the transitory
existence of individuals ; whilst to the maintenance of the
collective production for future generations, to intellectual
products, powers, possessions, and enjoyments, and to the
State with its higher tasks and aims, scarcely a thought is
given. The truth is that nations are specialised organisms
with distinct principles of life, having definite individualities
which determine the course of their historical development.
Each is through all time one whole ; and, as the present is
the heir of the past, it ought to keep before it constantly the
permanent good of the community in the future. The eco-
nomic existence of a people is only one side or province of
its entire activity, requiring to be kept in harmony with the
higher ends of society ; and the proper organ to effect this
reconciliation is the State, which, instead of being merely an
apparatus for the administration of justice, represents the
totality of the national life. The division of labour, Miiller
holds, is imperfectly developed by Smith, who makes it to
arise out of a native bent for truck or barter ; whilst its
dependence on capital — on the labours and accumulations of
past generations — is not duly emphasised, nor is the necessary

SYSTEM OF NATURAL LIBERTY. 191

counterpoise and completion of the division of labour, in
the principle of the national combination of labour, properly
brought out. Smith recognises only material, not spiritual,
capital ; yet the latter, represented in every nation by language,
as the former by money, is a real national store of experience,
wisdom, good sense, and moral feeling, transmitted with in-
crease by each generation to its successor, and enables each
generation to produce immensely more than by its own unaided
powers it could possibly do. Again, the system of Smith
is one-sidedly British ; if it is innocuous on the soil of
England, it is because in her society the old foundations on
which the spiritual and material life of the people can securely
rest are preserved in the surviving spirit of feudalism and the
inner connection of the whole social system — the national
capital of laws, manners, reputation, and credit, which has
been handed down in its integrity in consequence of the in«
sular position of the country. For the continent of Europe
a quite different system is necessary, in which, in place of the
sum of the private wealth of individuals being viewed as the
primary object, the real wealth of the nation and the produc-
tion of national power shall be made to predominate, and along
with the division of labour its national union and concentra-
tion— along with the physical, no less the intellectual and
moral, capital shall be embraced. In these leading traits of
Miiller's thought there is much which foreshadows the more
recent forms of German economic and sociological speculation,
especially those characteristic of the " Historical " schooL

Another element of opposition was represented by Friedrich
List (1789-1846), a man of great intellectual vigour as well
as practical energy, and notable as having powerfully contri-
buted by his writings to the formation of the German Zoll-
verein. His principal work is entitled Das Nationale System
der Politischen OeJconomie (1841 ; 7th ed., 1883: Eng. trans.,
1885). Though his practical conclusions were different from
Miiller's, he was largely influenced by the general mode of
thinking of that writer, and by his strictures on the doctrine

192 POLITICAL ECONOMY.

of Smith. It was particularly against the cosmopolitan prin-
ciple in the modern economic system that he protested, and
against the absolute doctrine of free trade, which was in
harmony with that principle. He gave prominence to the
National idea, and insisted on the special requirements of
each nation according to its circumstances and especially to
the degree of its development.

He refuses to Smith's system the title of the industrial,
which he thinks more appropriate to the mercantile system,
and designates the former as " the exchange-value system."
He denies the parallelism asserted by Smith between the eco-
nomic conduct proper to an individual and to a nation, and
holds that the immediate private interest of the separate
members of the community will not lead to the highest good
of the whole. The nation is an existence, standing between
the individual and Humanity, and formed into a unity by its
language, manners, historical development, culture, and con-
stitution. This unity is the first condition of the security,
wellbeing, progress, and civilisation of the individual; and
private economic interests, like all others, must be subordi-
nated-to the maintenance, completion, and strengthening of
the nationality. The nation having a continuous life, its true
wealth consists — and this is List's fundamental doctrine — not
in the quantity of exchange- values which it possesses, but in
the full and many-sided development of its productive powers.
.Its economic education, if we may so speak, is more important
than the immediate production of values, and it may be right
that' the ^present generation should sacrifice its gain and enjoy-
ment to secure the strength and skill of the future. In the
sound and normal condition of a nation which has attained
economic. maturity, the three productive powers of agriculture,
manufactures, and commerce should be alike developed. But
the two .latter factors are superior in importance, as exercising
a more effective and fruitful influence on the whole culture
of the nation, as well as on its independence. Navigation,
railways, all higher technical arts, connect themselves specially

SYSTEM OF NATURAL LIBERTY. 193

urith these factors ; whilst in a purely agricultural state there
is a tendency to stagnation r ahapnqe of enterprise, and the main-
tenance of antiquatec^ prejudices. But for the growth of the
higher forms of industry all countries are not adapted — only
those of the temperate zones, whilst the torrid regions have
a natural monopoly in the production of certain raw materials ;
and thus between these two groups of countries a division of
labour and confederation of powers spontaneously takes place.
List then goes on to explain his theory of the stages of econo-
mic development through which the nations of the temperate
zone, which are furnished with all the necessary conditions,
naturally pass, in advancing to their normal economic state.
These are (i) pastoral life, (2) apiculture, (i) agriculture
united with manufactures ; whilst in the final stage agriculture,
manufactures, and commerce are combined. The economic
task of the state is to bring into existence by legislative and
administrative action the conditions required for the progress
of the nation through these stages. Out of this view arises
List's scheme of industrial politics. Every nation, according
to him, should begin with free trade,, stimulating and improv-
ing its agriculture by intercourse with richer and more culti-
vated nations, importing foreign manufactures and exporting
raw products. When it is economically so far advanced that
it can manufacture for itself, then a system of protection
should be employed to allow the home industries to develop
themselves fully^ jjn,d save them from being overpowered in
their earlier efforts by the competition of more matured foreign
industries in the home market. When the national industries
have grown strong enough no longer to dread this competi-
tion, then the highest stage of progress has been reached ; free
hade should again become the rule, and the nation be thus
thoroughly incorporated with the universal industrial union. 'f
In List's time, according to his view, Spain, Portugal, and
Naples were purely agricultural countries ; Germany and the
United States of North America had arrived at the second
stage, their manufactures being in process of development'

N

194 POLITICAL ECONOMY.

France was near the boundary of the third or highest stage,
which England alone had reached. For England, therefore,
as well as for the agricultural countries first-named, free trade
was the right economic policy, but not for Germany or America.
What a nation loses for a time in exchange-values during the
protective period she much more than gains in the long run
in productive power, — the temporary expenditure being strictly
analogous, when we place ourselves at the point of view of
the life of the nation, to the cost of the industrial education
of the individual. The practical conclusion which List drew
for his own country was that she needed for her economic pro-
gress an extended and conveniently bounded territory reaching
to the sea-coast both on north and south, and a vigorous ex-
pansion of manufactures and commerce, and that the way to
the latter lay through judicious protective legislation with a
customs union comprising all German lands, and a German
marine with a Navigation Act. The national German spirit,
striving after independence and power through union, and the
national industry, awaking from its lethargy and eager to
recover lost ground, were favourable to the success of List's
book, and it produced a great sensation. He ably represented
the tendencies and demands of his time in his own country ;
his work had the effect of fixing the attention, not merely of
the speculative and official classes, but of practical men gene-
rally, on questions of Political Economy ; and he had without
doubt an important influence on German industrial policy.
So far as science is concerned, the emphasis he laid on the
relative historical study of stages of civilisation as affecting
economic questions, and his protest against absolute formulas,
had a certain value; and the preponderance given to the
national development over the immediate gains of individuals
was sound in principle ; though his doctrine was, both on its
public and private sides, too much of a mere chrematistic,
and tended in fact to set up a new form of mercantilism,
rather than to aid the contemporary effort towards social
reform.

SYSTEM OF NATURAL LIBERTY. 195

Most of the writers at home or abroad hitherto mentioned
continued the traditions of the school of Smith, only develop-
ing his doctrine in particular directions, sometimes not without
one-sidedness or exaggeration, or correcting minor °rrors into
which he had fallen, or seeking to give to tne exposition of
his principles more of order and lucidity. Some assailed the
abuse of abstraction by Smith's successors, objected to the con-
clusions of Ricardo and his followers their non-accordance with
the actual facts of human life, or protested against the anti-
social consequences which seemed to result from the application
of the (so-called) orthodox formulas. A few challenged Smith's
fundamental ideas, and insisted on the necessity of altering the
basis of general philosophy on which his economics ultimately
rest. But, notwithstanding various premonitory indications,
nothing substantial, at least nothing effective, was done, within
the field we have as yet surveyed, towards the establishment
of a really new order of thinking, or new mode of proceeding,
in this branch of inquiry. Now, however, we have to describe
a great and growing movement, which has already considerably
changed the whole character of the study in the conceptions
of many, and which promises to exercise a still more potent
influence in the future. We mean the rise of the Historical
School, which we regard as marking the third epoch in the
aiodern development of economic science.

CHAPTER YI.
THE HISTORICAL sr

THE negative movement which filled the eighteenth century
had for its watchword on the economic side the liberation of

industrial effort from both feudal survivals and Gpvernmental

fetters. But in all the aspects of that movement, the economic
as well as the rest, the process of demolition was historically
only the necessary preliminary condition of a total renova-
tion, towards which Western Europe was energetically tending,
though with but an indistinct conception of its precise nature.
The disorganisation of the body of opinion which underlay the
old system outran the progress towards the establishment of
new principles adequate to form a guidance in the future. The
critical philosophy which had wrought the disorganisation
could only repeat its formulas of absolute liberty, but was
powerless for reconstruction. And hence there was seen
throughout the West, after the French explosion, the remark-
able spectacle of a continuous oscillation between the tendency
to recur to outworn ideas and a vague impulse towards a new
order in social thought and life, this impulse often taking an
anarchical character.

From this state of oscillation, which has given to the iQth
century its equivocal and transitional aspect, the only possible
issue was in the foundation of a scientific social doctrine which
should supply a basis for the gradual convergence of opinion
on human questions. The foundation of such a doctrine is the
immortal service for which the world is indebted to Augusta

ff

THE HISTORICAL SCHOOL. 197

The leading features of Sociology, as lie conceived it, are
the following : — ut) it is essentially one^scierice, in which all
the elements of a social state are studied in their relations and
mutual actions ; (2) it includes a dynamical as well as a statical
theory of society; (3) it thus eliminates the absolute, substi-
tuting for an imagined fixity the conception of ordered change ;
(4) its principal method, though others are not excluded, is
that of historical comparison ; (5) it is pervaded by moral
ideas, by notions of social duty, as opposed to the individual
rights which were derived as corollaries from the jus natures;
and (6) in_ its spirit and practical consequences it tends to the
realisation of all the great ends which compose " the popular
cause " ; yet (7) it aims at this through peaceful means, re-
placing revolution by evolution.1 The several characteristics
we have enumerated are not independent ; they may be shown
to be vitally connected with each other. Several of these
features must now be more fully described; the others will
meet us before the close of the present survey.

In the masterly exposition of sociological method which is
contained in the fourth volume of fog

(i839),2 Comte marks out the broad division between social
sjajjjcj^and social /dynamica— the former studying the laws of

social coexistence, the latter those of social development. The
fundamental principle of the former is the general consensus

1 It would be a grave error to suppose that the subjection of social
phenomena to natural laws affords any encouragement to a spirit of fatal-
istic quietism. On the contrary, it is the existence of such laws that is
the necessary basis of all systematic action for the improvement either
of our condition or of our nature, as may be seen by considering the
parallel case of hygienic and therapeutic agencies. And, since the dif-
ferent orders of phenomena are more modifiable in proportion to their
greater complexity, the social field admits of more extensive and effica-
cious human intervention than the inorganic or vital domain. In rela-
tion to the dynamical side of Sociology, whilst the direction and essential
character of the evolution are predetermined, its rate and secondary
features are capable of modification.

2 He had already in 1822 stated his fundamental principles in an
opuscule which is reproduced in the Appendix to his Politique Positive.

198 POLITICAL ECONOMY.

between the several social organs and functions, which, without
unduly pressing a useful analogy, we may regard as resembling
that which exists between the several organs and functions of
an animal body. The study of dynamical is different from,
and necessarily subordinated to, that of statical sociology, pro-
gress being in fact the development of order, just as the study
of evolution in biology is different from, and subordinated to,
that of the structures and functions which are exhibited by
evolution as they exist at the several points of an ascending
scale. The laws of social coexistence and movement are as
much subjects for observation as the corresponding phenomena
in the life of an individual organism. For the study of
development in particular, a modification of the comparative
method familiar to biologists will be the appropriate mode of
research. The several successive stages of society will have
to be systematically compared, in order to discover their laws
of sequence, and to determine the filiation of their charac-
teristic features.

Though we must take care that both in our statical and
dynamical studies we do not ignore or contradict the funda-
mental properties of human nature, the project of deducing
either species of laws from those properties independently
of direct observation is one which cannot be realised.
Neither the general structure of human society nor the
march of its development could be so predicted. This is
especially evident with respect to dynamical laws, because, in
the passage of society from one phase to another, the pre-
ponderating agency is the accumulated influence of past
generations, which is much too complex to be investigated
deductively — a conclusion which it is important to keep
steadily before us now that some of the (so-called) anthro-
pologists are seeking to make the science of society a mere
annex and derivative of biology. The principles of biology
unquestionably lie at the foundation of the social science, but
the latter has, and must always have, a field of research and
a method of inquiry peculiar to itself. The field is history in

THE HISTORICAL SCHOOL. 199

the largest sense, including contemporary fact ; and the prin-
cipal, though not exclusive, method is, as we have said, that
process of sociological comparison which is most conveniently
called "the historical method."

These general principles affect the economic no less than
other branches of social speculation ; and with respect to that
department of inquiry they lead to important results. They
show that the idea of forming a true theory of the economic
frame and working of society apart from its other sides is
illusory. Such study is indeed provisionally indispensable,
but no rational theory of the economic organs and functions
of society can be constructed if they are considered as isolated
from the rest. In other words, a separate economic science
is, strictly speaking, an impossibility, as representing only
one portion of a complex organism, all whose parts and their
actions are in a constant relation of correspondence and
reciprocal modification. Hence, too, it will follow that,
whatever useful indications may be derived from our general
knowledges of individual human nature, the economic structure
of society and its mode of development cannot be deductively
foreseen, but must be ascertained by direct historical investi-
gation. We have said "its mode of development"; for it is
obvious that, as of every social element, so of the economic
factor in human affairs, there must be a dynamical doctrine,
a theory of the successive phases of the economic condition ol
society ; yet in the accepted systems this was a desideratum,
nothing but some partial and fragmentary notions on this
whole side of the subject being yet extant.1 And, further,
the economic structure and working of one historic stage
being different from those of another, we must abandon the
idea of an absolute system possessing universal validity, and
substitute that of a series of such systems, in which, however,

1 Under the influence of these views of Comte, J. S. Mill attempted
in Book IV. of his Political Economy a treatment of Economic Dynamics ;
but that appears to us one of the least satisfactory portions of hia
work.

200 POLITICAL ECONOMY.

the succession is not at all arbitrary, but is itself regulated
by law.

Though Comte's enterprise was a constructive one, his aim
being the foundation of a scientific theory of society, he could
not avoid criticising the labours of those who before him had
treated several branches of social inquiry. Amongst them the
economists were necessarily considered ; and he urged or im-
plied, in various places of his above-named work, as well as
of his Politique Positive, objections to their general ideas and
methods of procedure essentially the same with those which
we stated in speaking of Ricardo and his followers. J. S.
Mill shows himself much irritated by these comments, and
remarks on them as showing "how extremely superficial M.
Comte " (whom he yet regards as a thinker quite comparable
with Descartes and Leibnitz) " could sometimes be," — an un-
fortunate observation, which he would scarcely have made
if he could have foreseen the subsequent march of Euro-
pean thought, and the large degree in which the main points
of Comte's criticism have been accepted or independently
reproduced.

GERMANY.

The second manifestation of this new movement in economic
science was the appearance of the German historical, school.
The views of this school do not appear to have arisen, like
Comte's theory of sociological method, out of general philo-
sophic ideas ; they seem rather to have been suggested by an
extension to the economic field of the conceptions of the his-
torical school of jurisprudence of which Savigny was the most
eminent representative. The juristic system is not .a fixed
social phenomenon, but is variable from one stage , in the
progress of society to another; it is in vital relation with
the other coexistent social factors ; and what is, in* the jural
sphere, adapted ' to one period of development, is often unfit
for another. These ideas were seen to be applicable to the

THE HISTORICAL SCHOOL. 201

economic system also; the relative point of view was thus
reached, and the absolute attitude was found to be untenable.
Cosmopolitanism in theory, or the assumption of a system
equally true of every country, and what has been called per-
petualism, or the assumption of a system applicable to every
social stage, were alike discredited. And so the German
historical school appears to have taken its rise.

Omitting preparatory indications and undeveloped germs
of doctrine, we must trace the origin of the school to Wilhelm
Roscher (1817-1894). Its fundamental principles are stated,
though with some hesitation, and with an unfortunate contrast of
the historical with the "philosophical" method,1 in his Grundriss
zu Vorlesungen uber die Staatswirthschaft nach gescTiichtlicher
Methods (1843). The following are the leading heads in-
sisted on in the preface to that work.

"The historical method exhibits itself not merely in the
external form of a treatment of phenomena according to their
chronological succession, but in the following fundamental
ideas, (i.) The aim is to represent what nations have thought,
willed, and discovered in the economic field, what they have
striven after and attained, and why they have attained it
(2.) A people is not merely the mass of individuals now
living ; it will not suffice to observe contemporary facts. (3.)
All the peoples of whom we can learn anything must be
studied and compared from the economic point of view,
especially the ancient peoples, whose development lies before
us in its totality. (4.) We must not simply praise or blame
economic institutions ; few of them have been salutary or
detrimental to all peoples and at all stages of culture ; rather
it is a principal task of science to show how and why, out
of what was once reasonable and beneficent, the unwise and
inexpedient has often gradually arisen." Of the principles
enunciated in this paraphrase of Reseller's words a portion

1 This phraseology was probably borrowed from the controversy on
the method of jurisprudence between Thibaut on the one hand and
Saviguy and the school of Hugo on the other.

202 POLITICAL ECONOMY.

of the third alone seems open to objection ; the economy o\
ancient peoples is not a more important subject of study than
that of the moderns ; indeed, the question of the relative im-
portance of the two is one that ought not to be raised. For
the essential condition of all sound sociological inquiry is the
comparative consideration of the entire series of the most
complete evolution known to history — that, namely, of the
group of nations forming what is known as the Occidental
Commonwealth, or, more briefly, "the West." The reasons
for choosing this social series, and for provisionally restricting
our studies almost altogether to it, have been stated with
unanswerable force by Comte in the Philosophic Positive.
Greece and Kome are, indeed, elements in the series ; but it
is the development as a whole, not any special portions of it,
that Sociology must keep in view in order to determine the
laws of the movement, — just as, in the study of biological
evolution, no one stage of an organism can be considered as of
preponderating importance, the entire succession of changes
being the object of research. Of Koscher's further eminent
services we shall speak hereafter ; he is now mentioned only
in relation to the origin of the new school.

In 1848 Bruno Hildebrand (1812-1878) published the first
volume of a work, which, though he lived for many years after
he never continued, entitled Die Nationalolconomie der Gegen-
wart und Zukunft. Hildebrand was a thinker of a really
high order; it may be doubted whether amongst German
economists there has been any endowed with a more profound
and searching intellect. He is quite free from the wordiness
and obscurity which too often characterise German writers,
and traces broad outlines with a sure and powerful hand. His
book contains a masterly criticism of the economic systems
which preceded, or belonged to, his time, including those of
Smith, Miiller, List, and the socialists. But it is interesting
to us at present mainly from the general position he takes up,
and his conception of the real nature of political economy.
The object of his work, he tells us, is to open a way in the

THE HISTORICAL SCHOOL. 203

economic domain to a thorough historical direction and method,
and to transform the science into a doctrine of the laws of the
economic development of nations. It is interesting to observe
that the type which he sets before him in his proposed reform
of political economy is not that of historical jurisprudence,
but of the science of language as it has been reconstructed in
the i Qth century, a selection which indicates the comparative
method as the one which he considered appropriate. In
both sciences we have the presence of an ordered variation in
time, and the consequent substitution of the relative for the
absolute.

In 1853 appeared the work of Karl Knies (1821-1898),
entitled Die Politische Oekonomie vom Standpunkte der
geschichtlichen Methode. This is an elaborate exposition and de-
fence of the historical method in its application to economic
science, and is the most systematic and complete manifesto of the
new school, at least on the logical side. The fundamental
propositions are that the economic constitution of society at any
epoch on the one hand, and on the other the contemporary theo-
retic conception of economic science, are results of a definite his-
torical development; that they are both in vital connection
with the whole social organism of the period, having grown
up along with it and under the same conditions of time, place,
and nationality ; that the economic system must therefore be
regarded as passing through a series of phases correlative with
the successive stages of civilisation, and can at no point of
this movement be considered to have attained an entirely
definitive form ; that no more the present than any previous
economic organisation of society is to be regarded as absolutely
good and right, but only as a phase in a continuous historical
evolution ; and that in like manner the now prevalent economic
doctrine is not to be viewed as complete and final, but only as
representing a certain stage in the unfolding or progressive
manifestation of the truth.

The theme of the book is handled with, perhaps, an undue
degree of expansion and detail. The author exhibits much

204 POLITICAL ECONOMY.

sagacity as well as learning, and criticises effectively the errors,
inconsistencies, and exaggerations of his predecessors. But in
characterising and vindicating the historical method he has
added nothing to Comte. A second edition of his treatise was
published in 1883, and in this he makes the singular confes-
sion that, when he wrote in 1852, the Philosopliie Positive,
the six volumes of which had appeared from 1830 to 1842,
was entirely unknown to him and, he adds, prohably to all
German economists. This is not to the credit of their open-
mindedness or literary vigilance, if we remember that Mill
was already in correspondence with Comte in 1841, and that
his eulogistic notice of him in the Logic appeared in 1843.
When, however, Knies at a later period examined Comte'a
work, he was, he tells us, surprised at finding in it so many
anticipations of, or " parallelisms " with, his own conclusions.
And well he might; for all that is really valuable in his
methodology is to be found in Comte, applied on a larger
scale, and designed with the broad and commanding power
which marks the dii majores of philosophy.

There are two points which seem to be1 open to criticism in
the position taken by some German economists of the historical
school.

i. Knies and some other writers, in maintaining the principle
of relativity in economic theory, appear not to preserve the due
balance in one particular. The two forms of absolutism in
doctrine, cosmopolitanism and what Knies calls perpetualism,
he seems to place on exactly the same footing; in other words,
he considers the error of overlooking varieties of local circum-
stances and nationality to be quite as serious as that of neglect-
ing differences in the stage of historical development. But
this is certainly not so. In every branch of Sociology the
latter is much the graver error, vitiating radically, wherever
it is found, the whole of our investigations. If we ignore the
fact, or mistake the direction, of the social movement, we are
wrong in the most fundamental point of all — a point, too,
which is involved in every question. But the variations de-

THE HISTORICAL SCHOOL. 205

pending on difference of race, as affecting bodily and mental
endowment, or on diversity of external situation, are secondary
phenomena only; they must be postponed in studying the
general theory of social development, and taken into account
afterwards when we come to examine the modifications in the
character of the development arising out of peculiar conditions.
And, though the physical nature of a territory is a condition
which is likely to operate with special force on economic phe-
nomena, it is rather on the technical forms and comparative
extension of the several branches of industry that it will act
than on the social conduct of each branch, or the co-ordination
and relative action of all, which latter are the proper subjects
of the inquiries of the economist.

2. Some members of the school appear, in their anxiety to
assert the relativity of the science, to fall into the error of
denying economic laws altogether ; they are at least unwilling
to speak of " natural laws " in relation to the economic world.
From a too exclusive consideration of law in the inorganic
sphere, they regard this phraseology as binding them to the
notion of fixity and of an invariable system of practical
economy. But, if we turn our attention rather to the organic
sciences, which are more kindred to the social, we shall see
that the term " natural law" carries with it no such implica-
'tion. As we have more than once indicated, an essential part
of the idea of life is that of development, in other words, of
" ordered change." And that such a development takes place
in the constitution and working of society in all its elements
is a fact which cannot be doubted, and which these writers
themselves emphatically assert. That there exist between the
several social elements such relations as make the change of
one element involve or determine the change of another is
equally plain ; and why the name of natural laws should be
denied to such constant relations of coexistence and succession
it is not easy to see. These laws, being universal, admit of
the construction of an abstract theory of economic develop-
ment ; whilst a part of the German historical school tends to

206 POLITICAL ECONOMY.

substitute for such a theory a mere description of different
national economies, introducing prematurely — as we have
pointed out — the action of special territorial or ethnological
conditions, instead of reserving this as the ground of later
modifications, in concrete cases, of the primary general lawa
deduced from a study of the common human evolution.

To the three writers above named, Roscher, Hildebrand,
and Knies, the foundation of the German historical school of
political economy belongs. It does not appear that Koscher
in his own subsequent labours has been much under the in-
fluence of the method which he has in so many places admir-
ably characterised. In his System der Volkswirthschaft (vol. i.t
Grundlagen der Nationalokonomie, 1854; 23(1 ed., 1900: Eng.
transl. by J. J. Lalor, 1878; vol. ii., N. 0. des Ackerbaues, 1860;
1 3th ed., 1903 ; vol. iit., JT. 0. des Handels und Gewerbfleisses,
yth ed., 1887) the dogmatic and the historical matter are
rather juxtaposed than vitally combined. It is true that he
has most usefully applied his vast learning to special historical
studies, in relation especially to the progress of the science itself.
His treatise Ueber das Verhaltniss der Nationalokonomie zum
classischen Alterthume (1849), his Zur Geschichte der Eng~
lischen Volkswirthschqftslehre (1851-2), and, above all, that
marvellous monument of erudition and industry, his Geschichte
der National-Oekonomik in Deutschland (1874), to which he
is said to have devoted fifteen years of study, are among the
most valuable extant works of this kind, though the last by
its accumulation of detail is unfitted for general study out-
side of Germany itself. Several interesting and useful mono-
graphs are collected in his Ansichten der Volkswirthschaft vom
geschichtlichen Standpunkte (1861, 3d ed., 1878). His sys-
tematic treatise, too, above referred to, abounds in historical
notices of the rise and development of the several doctrines of
the science. But it cannot be alleged that he has done much
towards the transformation of political economy which his
earliest labours seemed to announce; and Cossa appears to
be right in saying that his dogmatic work has not effected

THE HISTORICAL SCHOOL. 207

any substantial modification of the principles of Hermann
and Kan.

The historical method has exhibited its essential features
more fully in the hands of the younger generation cf scientific
economists in Germany, amongst whom may be reckoned
Lujo Brentano, Adolf Held, Erwin Nasse, Gustav Schmoller,
II. Rosier, Albert Schaffle, Hans von Scheel, Gustav Schon-
berg, and Adolf Wagner. Besides the general principle of an
historical treatment of the science, the leading ideas which
have been most strongly insisted on by this school are the
following. I. The necessity of accentuating the moral element
in economic study. This consideration has been urged with
special emphasis by Schmoller in his Grundfragen der Rechtes
und der Moral (1875) and by Schaffle in his Das gesellschaft-
liche System der menschlichen Wirthschaft (1861, 3d ed., 1873).
G. Kries (d. 1858) appears also to have handled the subject well
in a review of J. S. Mill. According to the most advanced
organs of the school, three principles of organisation are at
work in practical economy; and, corresponding with these,
there are three different systems or spheres of activity. The lat-
ter are (i) private economy ; (2) the compulsory public economy ;
(3) the " caritative " sphere. In the first alone personal interest
predominates ; in the second the general interest of the society ;
in the third the benevolent impulses. Even in the first, however,
the action of private interests cannot be unlimited ; not to speak
here of the intervention of the public power, the excesses and
abuses of the fundamental principle in this department must be
checked and controlled by an economic morality, which can
never be left out of account in theory any more than in
practical applications. In the third region above named, moral
influences are of course supreme. II. The close relation which
necessarily exists between economics and jurisprudence. This
has been brought out by L. von Stein and H. Rosier, but is
most systematically established by Wagner — who is, without
doubt, one of the most eminent of living German economists
— especially in his Grundlegung, now forming part of the

ao8 POLITICAL ECONOMY.

comprehensive Lehrbuch der politischen Oekonomie published
by him and Professor Nasse jointly. The doctrine of the
jus naturae, on which the physiocrats, as we have seen, reared
their economic structure, has lost its hold on belief, and the
old a priori and absolute conceptions of personal freedom and
property have given way along with it. It is seen that the
economic position of the individual, instead of depending
merely on so-called natural rights or even on his natural
powers, is conditioned by the contemporary juristic system,
which is itself an historical product. The above-named con-
ceptions, therefore, half economic half juristic, of freedom
and property require a fresh examination. It is principally
from this point of view that Wagner approaches economic
studies. The point, as he says, on which all turns is the old
question of the relation of the individual to the community
Whoever with the older juristic and political philosophy and
national economy places the individual in the centre cornea
necessarily to the untenable results which, in the economic
field, the physiocratic and Smithian school of free competition
has set up. Wagner on the contrary investigates, before
anything else, the conditions of the economic life of the com-
munity, and, in subordination to this, determines the sphere
of the economic freedom of the individual. IIL A different
conception of the functions of the State from that entertained
by the school of Smith. The latter school has in general
followed the view of Rousseau and Kant that the sole office of
the state is the protection of the. members of the community
from violence and fraud. This doctrine, which was in harmony
with those of the jus natures and the social contract, was
temporarily useful for the demolition of the old economic
system with its complicated apparatus of fetters and restric-
tions. But it could not stand against a rational historical
criticism, and still less against the growing practical demands
of modern civilisation. In fact, the abolition of the impolitic
and discredited system of European Governments, by bringing
to the surface the evils arising from unlimited competition.

THE HISTORICAL SCHOOL. 209

irresistibly demonstrated the necessity of public action accord-
ing to new and more enlightened methods. The German
historical school recognises the State as not merely an insti-
tution for the maintenance of order, but as the organ of the
nation for all ends which cannot be adequately effected by
voluntary individual effort. Whenever social aims can be
attained only or most advantageously through its action, that
action is justified.1 The cases in which it can properly inter-
fere must be determined separately on their own merits and
in relation to the stage of national development. It ought
certainly to promote intellectual and aesthetic culture. It
ought to enforce provisions for public health and regulations
for the proper conduct of production and transport. It ought
to protect the weaker members of society, especially women,
children, the aged, and the destitute, at least in the absence
of family maintenance and guardianship. It ought to secure
the labourer against the worst consequences of personal injury
not due to his own negligence, to assist through legal recogni-
tion and supervision the efforts of the working classes for joint
no less than individual self-help, and to guarantee the safety
of their earnings, when intrusted to its care.

A special influence which has worked on this more recent
group is that of theoretic socialism; we shall see hereafter
that socialism as a party organisation has also affected their
practical politics. With such writers as St. Simon, Fourier,
and Proudhon, Lassalle, Marx, Engels, Mario, and Rodbertus,
we do not deal in the present treatise; but we must recog-
nise them as having powerfully stimulated the younger Ger-
man economists (in the more limited sense of this last
word). They have even modified the scientific conclusions
of the latter, principally through criticism of the so-called
orthodox system. Schame and Wagner may be especially
named as having given a large space and a respectful attention

1 It will in each case be necessary to examine whether the action can
best be taken by the central, or by the local, government.

2io POLITICAL ECONOMY.

to their arguments. In particular, the important consideration,
to which we have already referred, that the economic position
of the individual depends on the existing legal system, and
notably on the existing organisation of property, was first
insisted on hy the socialists. They had also pointed out that
the present institutions of society in relation to property, in-
heritance, contract, and the like, are (to use Lassalle's phrase)
"historical categories which have changed, and are subject
to further change," whilst in the orthodox economy they are
generally assumed as a fixed order of things on the basis of
which the individual creates his own position. J. S. Mill,
as we have seen, called attention to the fact of the distribution
of wealth depending, unlike its production, not on natural
laws alone, but on the ordinances of society, but it is some
of the German economists of the younger historical school
who have most strongly emphasised this view. To rectify
and complete the conception, however, we must bear in mind
that those ordinances themselves are not arbitrarily change-
able, but are conditioned by the stage of general social
development.

In economic politics these writers have taken up a position
between the German free-trade (or, as it is sometimes with
questionable propriety called, the Manchester) party and the
democratic socialists. The latter invoke the omnipotence of
the State to transform radically and immediately the present
economic constitution of society in the interest of the pro-
letariate. The free-traders seek to minimise state action for
any end except that of maintaining public order, and securing
the safety and freedom of the individual. The members of
the school of which we are now speaking, when intervening
in the discussion of practical questions, have occupied an inter-
mediate standpoint. They are opposed alike to social revolu-
tion and to rigid laisser faire. Whilst rejecting the socialistic
programme, they call for the intervention of the State in
accordance with the theoretic principles already mentioned,
for the purpose of mitigating the pressure of the modern

THE HISTORICAL SCHOOL. 211

industrial system on its weaker members, and extending in
greater measure to the working classes the benefits of advanc-
ing civilisation. Schaffle in his Capitalismus und Socialismus
(1870 ; now absorbed into a larger work), Wagner in his Rede
iiber die sociale Frage (1871), and Schonberg in his Arbeit-
stimter: eine Aufgabe des deutschen Reichs (1871) advocated
this policy in relation to the question of the labourer. These
expressions of opinion, with which most of the German
professors of political economy sympathised, were violently
assailed by the organs of the free-trade party, who found in
them " a new form of socialism." Out of this arose a lively
controversy; and the necessity of a closer union and a prac-
tical political organisation being felt amongst the partisans of
the new direction, a congress was held at Eisenach in October
1872, for the consideration of "the social question." It was
attended by almost all the professors of economic science in
the German universities, by representatives of the several
political parties, by leaders of the working men, and by some
of the large capitalists. At this meeting the principles above
explained were formulated. Those who adopted them obtained
from their opponents the appellation of " Katheder-Socialisten,"
or " socialists of the (professorial) chair," a nickname invented
by H. B. Oppenheim, and which those to whom it was applied
were not unwilling to accept. Since 1873 this group has been
united in the " Yerein fiir Socialpolitik," in which, as the con-
troversy became mitigated, free-traders also have taken part
Within the Yerein a division has shown itself. The left wing
has favoured a systematic gradual modification of the law of
property in such a direction as would tend to the fulfilment
of the socialistic aspirations, so far as these are legitimate,
whilst the majority advocate reform through state action on the
basis of existing jural institutions. Schaffle goes so far as to
maintain that the present " capitalistic" regime will be replaced
by a socialistic organisation ; but, like J. S. Mill, he adjourns
this change to a more or less remote future, and expects it
as the result of a natural development, or process of " social

212 POLITICAL ECONOMY.

selection ; w l he repudiates any immediate or violent revolution,
Bnd rejects any system of life which would set up "abstract
equality " against the claims of individual service and merit.

The further the .investigations of the German historical
school have been carried, in the several lines of inquiry it has
opened, the more clearly it has come to light that the one
thing needful is not merely a reform of political economy, but
its fusion in a complete science of society. This is the view
long since insisted on by Auguste Comte ; and its justness
is daily becoming more apparent. The best economists of
Germany now tend strongly in this direction. Schaffle (1831-
1903), who was largely under the influence of Comte and
Herbert Spencer, actually attempted the enterprise of widening
economic into social studies. In his most important work,
which had been prepared by previous publications, Ban und
Leben des socialen Korpers (1875-78; new ed., 1896), he
proposes to give a comprehensive plan of an anatomy, physi-
ology, and psychology of human society. He considers social
processes as analogous to those of organic bodies; and, sound
and suggestive as the idea of this analogy, already used by Comte,
undoubtedly is, he carries it, perhaps, to an undue degree of de-
tail and elaboration. The same conception is adopted, and pre-
sented in a very exaggerated form, by P. von Lilienfeld in his
Gedanken uber die Socialwissenschaft der Zukunft (1873-81).
A tendency to the fusion of economic science in Sociology is also
found in Adolph Samter's Sozial-lehre (1875) — though the eco-
nomic aspect of society is there specially studied — and in Schmol-
ler's already mentioned treatise Ueber einige Grundfragen ; and
the necessity of such a transformation is energetically asserted
by H. von Scheel in the preface to his German version (1879)
of an English tract 1 On the present Position and Prospects of
Political Economy.

1 This should be remembered by readers of M. Leroy-Beaulieu's work
on Collectivism (1884), in which he treats Schaffle as the principal theo-
retic representative of that form of socialism.

2 By the present writer ; being an Address to the Section of Economic
Science and Statistics of the British Association at its meeting in Dublin
in 1878.

THE HISTORICAL SCHOOL. 213

The name "Realistic," which has sometimes been given
to the historical school, especially in its more recent form,
appears to be injudiciously chosen. It is intended to mark
the contrast with the " abstract " complexion of the orthodox
economics. But the error of these economics lies, not in the
use, but in the abuse of abstraction. All science implies
abstraction, seeking, as it does, for unity in variety ; the
question in every branch is as to the right constitution of the
abstract theory in relation to the concrete facts. Nor is the
new school quite correctly distinguished as " inductive/1
Deduction doubtless unduly preponderates in the investiga-
tions of the older economists; but it must be remembered
that it is a legitimate process, when it sets out, not from a
priori assumptions, but from proved generalisations. And
the appropriate method of economics, as of all sociology, is
not so much induction as the specialised form of induction
known as comparison, especially the comparative study of
'* social series " (to use Mill's phrase), which is properly desig-
nated as the "historical" method. If the denominations here
criticised were allowed to prevail, there would be a danger
of the school assuming an unscientific character. It might
occupy itself too exclusively with statistical inquiry, and
forget in the detailed examination of particular provinces of
economic life the necessity of large philosophic ideas and of a
systematic co-ordination of principles. So long as economics
remain a separate branch of study, and until they are absorbed
into Sociology, the thinkers who follow the new direction will
do wisely in retailing their original designation of the his-
torical school.

The members of this and the other German schools have pro-
duced many valuable works besides those which there has been
occasion to mention above. Ample notices of their contribu-
tions to the several branches of the science (including its appli-
cations) will be found dispersed through Wagner and Basse's
Lehrbuck and the comprehensive Handbuch edited by Schon-
berg. The following list, which 4oes not pretend to approach to

214 POLITICAL ECONOMY.

completeness, is given for the purpose of directing the student to
a certain number of books which ought not to be overlooked in
the study of the subjects to which they respectively refer: —

Knies, Die Eiseribahnen und ihre Wirkungen (1853), Der Telegraph
(1857), Geld und Credit (1873-76-79) ; Rosier, Zur Kritik der Lehre vom
Arbeitslohn (1861) ; Schmoller, Zur Geschichte der deutschen Kleinge-
werbe im 19 Jahrh. (1870) ; Schaffle, Theorie der ausschliessenden Absatz-
verhdltnisse (1867), Quintessenz des socialismus (6th ed., 1878), Grund-
sdtze der Steuerpolitik (1880) ; Nasse, Mittelalterliche Feldgemeinschaft in
England (1869) ; Brentano, On the History and Development of Gilds, pre-
fixed to Toulmin Smith's English Gilds(i87o),DieArbeitergildenderGec/en-
wart (1871-72), Das Arbeitsverhilltniss gemdss dem heutigen Recht (1877),
Die Arbeitsversicherung gemdss der heutigen Wirthschaftsordnung (1879),
Der Arbeitsversicherungszwang ( 1881) , Die klassische Nationalokonomie
(1888) ; Held (born 1844, accidentally drowned in the Lake of Thun, 1880) ,
Die Einkommensteuer (1872), Die deutsche Arbetterpresse der Gegen-
wart (1873), Sozialismus, Sozialdemokratie und Sozialpolitik (1878),
Grundriss fiirVorlesungen iiber Nationalokonomie (2d ed., 1878) ; Zwei
Biicher zur socialen Geschichte Englands (posthumously published,
1881) ; Von Scheel (born 1839), Die Theorie der socialen Frage (1871),
Unsere social-politischen Parteien (1878) ; Von Bohm-Bawerk, Kapital
und Kapitalzinstheorien (1884-89). To these may be added L. von Stein,
Die Verwaltungslehre (1876-79), Lehrbuch der Finanzwissenschaft (4th
ed., 1878). E. Diihring is the ablest of the few German followers of
Carey; we have already mentioned (Bibl. Note) his History of the
Science. To the Russian-German school belongs the work of T. von
Bernhardi, which is written from the historical point of view, Versuch
einer Kritik der Griinde welche fur grosses und kleines Grundeigenthum
angefiihrt werden (1848). The free-trade school of Germany is recog-
nised as having rendered great practical services in that country,
especially by its systematic warfare against antiquated privileges and
restrictions. Cobden has furnished the model of its political action,
whilst, on the side of theory, it is founded chiefly on Say and Bastiat.
The members of this school whose names have been most frequently
heard by the English public are those of J. Prince Smith (d. 1874), who
may be regarded as having been its head ; H. von Treitschke, author of
Der Socialismus und seine Gonner, 1875 (directed against the Katheder-
Sooialisten) ; V. Bohmert, who has advocated the participation of work-
men in profits (Die Gewinnbetheiliyung, 1878); A. Emminghaus, author
of Das Armenwesen in Europaischen Staaten, 1870, part of which has
been translated in E. B. Eastwick's Poor Relief in Different Parts of
Europe, 1873 ; and J. H. Schultze-Delitzsch, well known as the founder of
the German popular banks, and a strenuous supporter of the system of
"co-operation." The socialist writers, as has been already mentioned, are

THE HISTORICAL SCHOOL. 215

aot included in the present historical survey, nor do we in general notice
writings of the economists (properly so called) having relation to the
history of socialism or the controversy with it1

The movement which created the new school in Germany,
with the developments which have grown out of it, have
without doubt given to that country at the present time the
primacy in economic studies. German influence has been felt in
the modification of opinion in other countries — most strongly,
perhaps, in Italy, and least so in France. In England it has
been steadily making way, though retarded by the insular
indifference to the currents of foreign thought which has
eminently marked our dominant school. Alongside of the
influence thus everted, a general distaste for the " orthodox "
system has been spontaneously growing, partly from a sus-
picion that its method was unsound, partly from a profound
dissatisfaction with the practice it inspired, and the detected
hollowness of the policy of mere laisser faire. Hence every-
where a mode of thinking and a species of research have shown
themselves, and come into favour, which are in harmony with
the systematic conceptions of the historical economists. Thus
a dualism has established itself in the economic world, a
younger school advancing towards predominance, whilst the
old school still defends its position, though its adherents tend
more and more to modify their attitude and to admit the
value of the new lights.

ITALY.

It is to be regretted that but little is known in England
and America of the writings of the recent Italian economists.

1 The most important general treatise on the science which has
appeared in Germany since the ahove paragraph was written is un-
doubtedly the System der Nationaloekonomie of G. Cohn, of which vol. i.
(1885) only has yet heen published. A movement of reaction in favour
of the older school is represented by C. Menger (Untersuchungen iiber
die Methode der Sociahvissenschaften, 1883, and Die Irrthumer des His-
torismus in der deutschen Nationalokonomie, 1888), H. Dietzel (Beitrdge
zur Methodik der Wirthschaftsioissenschaft, 1884), and E. Sax (Das
Wesen und die Aufgabe der Nationaloekonomie, 1884, Grundlegung
der theoretischen Staatswirthschaft, 1887, and Die Neuesten Fortschritte
der Nationalb'konomischen Theorie, 1888).

2i6 POLITICAL ECONOMY.

Luigi Cossa's Guida, which was translated at the suggestion
of Jevons,1 has given us some notion of the character and
importance of their labours. The urgency of questions of
finance in Italy since its political renascence has turned their
researches for the most part into practical channels, and they
have produced numerous monographs on statistical and ad-
ministrative questions. But they have also dealt ably with
the general doctrines of the science. Cossa pronounces Angelo
Messedaglia (b. 1820), professor at Padua, to be the foremost
of contemporary Italian economists ; he has written on public
loans (1850) and on population (1858), and is regarded as
a master of the subjects of money and credit. His pupil
Fedele Lampertico (b. 1833) *s author of many writings,
among which the most systematic and complete is his Economia
d&i popoli e degli stati (1874-1884). Marco Minghetti (1818-
1886), distinguished as a minister, was author, besides other
writings, of Economia pubblica e le sue attinenze colla morale
e col diritto (1859). Luigi Luzzatti, also known as an able ad-
ministrator, has by several publications sought to prepare the
way for reforms. Tho Sicilians Vito Cusumano and Giuseppe
Bicca Salerno have produced excellent works : — the former on
the history of political economy in the Middle Ages (1876), and
on the economic schools of Germany in their relation to the
social question (1875); the latter on the theories of capital,
wages, and public loans (1877-8-9). G. Toniolo, E? Nazzani,2
and A. Loria have also ably discussed the theories of rent and
profit, as well as some of the most important practical questions
of the day. Cossa, to whom we are indebted for most
of these particulars, is himself author of several works
which have established for him a high reputation, as his
Scienza delle Finanze (1875 ; 4th ed., 1887), and his Primi
Elementi di Economia Politico, (1875; 8th ed., 1888), which
latter has been translated into several European languages.

1 Guide to the Study of Political Economy, 1880. See also the Biblio-
graphical matter in his Primi Elementi di E. P., vol. i., 8th ed., 1888.

2 See his Saggi di Economia Politico,, 1881.

THE HISTORICAL SCHOOL. 217

*Of greater interest than such an imperfect catalogue of
writers is the fact of the appearance in Italy of the economic,
dualism to which we have referred as characterising our time.
There also the two schools — the old or so-called orthodox and
the new or historical — with their respective modified forms,
are found face to face. Cossa tells us that the instructors
of the younger economists in northern Italy were publicly
denounced in 1874 as Germanists, socialists, and corrupters
of the Italian youth. In reply to this charge Luzzatti, Lam-
pertico, and Scialoja convoked in Milan the first congress
of economists (1875) with the object of proclaiming their
resistance to the idea which was sought to be imposed on
them " that the science was born and died with Adam Smith
and his commentators." M. tmile de Laveleye's interesting
Lettres d'ltalie (1878-79) throw light on the state of eco-
nomic studies in that country in still more recent jears. Min-
ghetti, presiding at the banquet at which M. de Laveleye
was entertained by his Italian brethren, spoke of the " two
tendencies " which had manifested themselves, and implied his
own inclination to the new views. Carlo Ferraris, a pupil of
Wagner, follows the same direction. Formal expositions and
defences of the historical method have been produced by
R. Schiattarella (Del metodo in Economia Sociale, 1875) and
S. Cognetti de Martiis (Delle attinenze tra I' Economia Sociale
e la Storia, 1865). A large measure of acceptance has also
been given to the historical method in learned and judicious
monographs by Ricca Salerno (see especially his essay Del
metodo in Econ. Pol., 1878). Luzzatti and Forti for some time
edited a periodical, the Giornale degli Economist^ which was
the organ of the new school, but which, when Cossa wrote,
had ceased to appear. Cossa himself, whilst refusing his
adhesion to this school on the ground that it reduces political
economy to a mere narrative of facts, — an observation which,
we must be permitted to say, betrays an entire misconception
of its true principles, — admits that it has been most useful
in several ways, and especially as having given the signal foi

218 POLITICAL ECONOMY.

a salutary, though, as he thinks, an excessive, reaction against
the doctrinaire exaggerations of the older theorists.

PRANCE.

In France the historical school has not made so strong an
impression, — partly, no doubt, because the extreme doctrines
of the Ricardian system never obtained much hold there. It
was by his recognition of its freedom from those exaggerations
that Jevons was led to declare that " the truth is with the
French school," whilst he pronounced our English economists
to have been " living in a fool's paradise." National preju-
dice may also have contributed to the result referred to, the
ordinary Frenchman being at present disposed to ask whether
any good thing can come out of Germany. But, as we have
shown, the philosophic doctrines on which the whole proceed-
ing of the historical school is founded were first enunciated
by a great French thinker, whose splendid services most of his
fellow-countrymen seem, as yet, very inadequately to appreciate.
Perhaps another determining cause is to be looked for in official
influences, which in France, by their action on the higher
education, impede the free movement of independent con-
viction, as was seen notably in the temporary eclat they gave
on the wider philosophic stage to the shallow eclecticism of
Cousin. The tendency to the historical point of view has
appeared in France, as elsewhere ; but it has shown itself
not so much in modifying general doctrine as in leading to
a more careful study of the economic opinions and institutions
of the past.

Much useful work has been done by Frenchmen (with
whom Belgians may here be associated) in the history of
political economy, regarded either as a body of theory or as
a system — or series of systems — of policy. Blanqui's history
(1837-38) is not, indeed, entitled to a very high rank, but it
was serviceable as a first general draught. That of Yiileneuve-
Bargemont (1839) was also interesting and useful, as present-

THE HISTORICAL SCHOOL. 219

ing the Catholic view of the development and tendencies of
the science. C. Perin's Les doctrines economiques depuis un
siecle (1880) is written from the same point of view. A
number of valuable monographs on particular statesmen or
thinkers has also been produced by Frenchmen, — as, for
example, that of A. Batbie on Turgot (Turgot Philosophe,
ficonomiste, et Administrates, 1861); of A. Neymarck on
the same statesman (Turgot et ses doctrines, 1885); of Pierre
Cle'ment on Colbert (Histoire de Colbert et de son Administra-
tion, 2d ed., 1875) ; of H. Baudrillart on Bodin (J. Bodin et
son Temps ; Tableau des Theories politiques et des Idees econo-
miques au i6e siecle, 1853) ; of Le"once de Lavergne on the
physiocrats (Les ficonomistes Fran^ais du i8e siecle, 1870).
The treatise of M. de Laveleye, De la Propriete et de ses
formes primitives (1874; Eng. trans, by G. R. Marriott, 1878),
is specially worthy of notice, not merely for its array of facts
respecting the early forms of property, but because it co-operates
strongly with the tendency of the new school to regard each
stage of economic life from the relative point of view, as
resulting from an historic past, harmonising with the entire
body of contemporary social conditions, and bearing in its
bosom the germs of a future, predetermined in its essential
character, though modifiable in its secondary dispositions.

M. de Laveleye has done much to call attention to the
general principles of the historical school, acting in this way
most usefully as an interpreter between Germany and France.
But he appears in his latest manifesto (Les Lois naturelles
et Vobjet de V Economic Politique, 1883) to separate him-
self from the best members of that school, and to fall into
positive error, when he refuses to economics the character of
a true science (or department of a science) as distinguished
from an art, and denies the existence of economic laws or

220 POLITICAL ECONOMY.

tendencies independent of individual wills. Such a denial
seems to involve that of social laws generally, which is a sin-
gularly retrograde attitude for a thinker of our time to take
up, and one which cannot be excused since the appearance of
the Philosophie Positive. The use of the metaphysical phrase
"necessary laws" obscures the question; it suffices to speak
of laws which do in fact prevail. M. de Laveleye relies on
morals as supplying a parallel case, where we deal, not with
natural laws, but with " imperative prescriptions," as if these
prescriptions did not imply, as their basis, observed coexist-
ences and sequences, and as if there were no such thing as
moral evolution. He seems to be as far from the right point
of view in one direction as his opponents of the old school in
another. All that his arguments have really any tendency to
prove is the proposition, undoubtedly a true one, that economic
facts cannot be explained by a theory which leaves out of
account the other social aspects, and therefore that our studies
and expositions of economic phenomena must be kept in close
relation with the conclusions of the larger science of society.

We cannot do more than notice in a general way some of
the expository treatises of which there has been an almost
continuous series from the time of Say downwards, or indeed
from the date of Germain Garnier's Abrege des Principes de
Vficonomie Politique (1796). That of Destutt de Tracy forms
a portion of his Elements d'ldeologie (1823). Droz brought
out especially the relations of economics to morals and of
wealth to human happiness (Economic Politique^ 1829). Pelle-
grino Rossi, — an Italian, formed, however, as an economist by
studies in Switzerland, professing the science in Paris, and
writing in French (Cours d Economic Politique, 1838-54),-.-
gave in classic form an exposition of the doctrines of Say,
Malthus, and Ricardo. Michel Chevalier (1806-1879), speci-
ally known in England by his tract, translated by Cobden, on
the fall in the value of gold (La Baisse d'Or, 1858), gives in
his Cours dEconornie Politique (1845-50) particularly valu-
able matter on the most recent industrial phenomena, and

THE HISTORICAL SCHOOL. 221

on money and the production of the precious metals. Henri
Baudrillart, author of Les Rapports de la Morale et de
I'JJJconomie Politique (1860 ; 2d ed., 1883), an^ of Histoire du
Luxe (1878), published in 1857 a Manuel d' Economic Politique
(3d ed., 1872), which Cossa calls an " admirable compendium."
Joseph Gamier (Traite de I'Bconomie Politique, 1860; 8th ed.,
1880) in some respects follows Dunoyer. J. G. Courcelle-
Seneuil, the translator of J. S. Mill, whom Prof. F. A. Walker
regards as " perhaps the ablest economist writing in the French
language since J. B. Say," besides a Traite theorique et
pratique des operations de Banque and Theorie des Enterprises
Industrielles (1856), wrote a Traite d'JJIconomie Politique
(1858-59; 2d ed., 1867), which is held in much esteem.
Finally, the Genevese, Antoine Elise Cherbuliez (d. 1869),
was author of what Cossa pronounces to be the best treatise
on the science in the French language (Precis de la Science
Jficonomique, 1862). L. Walras, in Elements d'Economie
Politique pure (1874-77), and Theorie Mathematique de la
Richesse Sociale (1883), has followed the example of Cournot
n attempting a mathematical treatment of the subject

ENGLAND.

Sacrificing the strict chronological order of the history of
economics to deeper considerations, we have already spoken of
Cairnes, describing him as the last original English writer who
was an adherent of the old school pure and simple. Both in
method and doctrine he was essentially Kicardian; though
professing and really feeling profound respect for Mill, he
was disposed to go behind him and attach himself rather to
their common master. Mr. Sidgwick is doubtless right in be-
lieving that his Leading Principles did much to shake " the
unique prestige which Mill's exposition had enjoyed for nearly
half a generation," and in this, as in some other ways, Cairnes
may have been a dissolving force, and tended towards radical
change ; but, if he exercised this influence, he did so uncon-

222 POLITICAL ECONOMY.

sciously and involuntarily. Many influences had, however,
for some time been silently sapping the foundations of the old
system. The students of Comte had seen that its method was
an erroneous one. The elevated moral teaching of Carlyle
had disgusted the best minds with the low maxims of the
Manchester school. Kuskin had not merely protested against
the egoistic spirit of the prevalent doctrine, but had pointed
to some of its real weaknesses as a scientific theory.1 It began
to be felt, and even its warmest partisans sometimes admitted,
that it had done all the work, mainly a destructive one, of
which it was capable. Cairnes himself declared that, whilst
most educated people believed it doomed to sterility for the
future, some energetic minds thought it likely to be a positive
obstruction in the way of useful reform. Miss Martineau,
who had in earlier life been a thorough Kicardian, came to
think that political economy, as it had been elaborated by her
contemporaries, was, strictly speaking, no science at all, and
must undergo such essential change that future generations
would owe little to it beyond the establishment of the exist-
ence of general laws in one department of human affairs.2 The
instinctive repugnance of the working classes had continued,
in spite of the efforts of their superiors to recommend its
lessons to them — efforts which were perhaps not unfrequently
dictated rather by class interest than by public spirit. All
the symptoms boded impending change, but they were visible
rather in general literature and in the atmosphere of social
opinion than within the economic circle.3 But when it be-
came known that a great movement had taken place, especially
in Germany, on new and more hopeful lines, the English econo-
mists themselves began to recognise the necessity of a reform

1 The remarkable book Money and Morals, by John Lalor, 1852, wa«
written partly under the influence of Carlyle. There is a good mono-
graph entitled John JRuskin, Economist, by P. Geddes, 1884.

2 See her Autobiography, 26. ed., vol. ii. p. 244.

* A vigorous attack on the received system was made by David Syme
in his Outlines of an Industrial Science, 1876.

THE HISTORICAL SCHOOL. 223

and even to further its advent. The principal agencies of this
kind, in marshalling the way to a renovation of the science,
have been those of Bagehot, Leslie, and Jevons, — the first
limiting the sphere of the dominant system, while seeking to
conserve it within narrower bounds ; the second directly assail-
ing it and setting up the new method as the rival and destined
successor of the old ; and the third acknowledging the collapse
of the hitherto reigning dynasty, proclaiming the necessity of
an altered regime, and admitting the younger claimant as joint
possessor in the future. Thus, in England too, the dualism
which exists on the Continent has been established ; and there
is reason to expect that here more speedily and decisively than
in France or Italy the historical school will displace its an-
tagonist. It is certainly in England next after Germany that
the preaching of the new views has been most vigorously and
effectively begun.

Walter Bagehot (1826—1877) was author of an excellent
work on the English money market and the circumstance*
which have determined its peculiar character (Lombard Street,
1873 ; 8th ed., 1882), and of several monographs on particular
monetary questions, which his practical experience, combined
with his scientific habits of thought, eminently fitted him to
handle. On the general principles of economics he wrote
some highly important essays collected in Economic Studies
(edited by R. H. Hutton, 1880), the object of which was to
show that the traditional system of political economy — the
system of Ricardo and J. S. Mill — rested on certain funda-
mental assumptions, which, instead of being universally true in
fact, were only realised within very narrow limits of time and
space. Instead of being applicable to all states of society,
it holds only in relation to those "in which commerce has
largely developed, and where it has taken the form of develop-
ment, or something like the form, which it has taken in
England." It is "the science of business such as business
is in large and trading communities — an analysis of the great
commerce by which England has become rich." But more

224 POLITICAL ECONOMY.

than this it is not ; it will not explain the economic life of
earlier times, nor even of other communities in our own time ;
and for the latter reason it has remained insular ; it has never
been fully accepted in other countries as it has been at home.
It is, in fact, a sort of ready reckoner, enabling us to calculate
roughly what will happen under given conditions in Lombard
Street, on the Stock Exchange, and in the great markets of
the world. It is a " convenient series of deductions from
assumed axioms which are never quite true, which in many
times and countries would be utterly untrue, but which are
sufficiently near to the principal conditions of the modern"
English "world to make it useful to consider them by
themselves."

Mill and Cairnes had already shown that the science they
taught was a hypothetic one, in the sense that it dealt not with
real but with imaginary men — " economic men " who were
conceived as simply " money-making animals." But Bagehot
went further : he showed what those writers, though they
may have indicated, had not clearly brought out,1 that the
world in which these men were supposed to act is also "a
very limited and peculiar world." What marks off this
special world, he tells us, is the promptness of transfer of
capital and labour from one employment to another, as deter-
mined by differences in the remuneration of those several
employments — a promptness about the actual existence of
which in the contemporary English world he fluctuates a good
deal, but which on the whole he recognises as substantially
realised.

Bagehot described himself as "the last man of the ante-
Mill period," having learned his economics from Kicardo;
and the latter writer he appears to have to the end greatly
over-estimated. But he lived long enough to gain some know-
ledge of the historical method, and with it he had " no quarrel
but rather much sympathy." "Rightly conceived," he said,

1 Jones, whose writings were apparently unknown to Bagehot, had,
»s we have seen, in some degree anticipated him in this exposition.

THE HISTORICAL SCHOOL. 225

"it is no rival to the abstract method rightly conceived."
We will not stop to criticise a second time the term " abstract
method " here applied to that of the old school, or to insist
on the truth that all science is necessarily abstract, the only
question that can arise being as to the just degree of abstraction,
or, in general, as to the right constitution of the relation between
the abstract and the concrete. It is more apposite to remark
that Bagehot's view of the reconciliation of the two methods
is quite different from that of most " orthodox " economists.
They commonly treat the historical method with a sort of
patronising toleration as affording useful exemplifications or
illustrations of their theorems. But, according to him, the
two methods a're applicable in quite different fields. For what
he calls the " abstract " method he reserves the narrow, but
most immediately interesting, province of modern advanced
industrial life, and hands over to the historical the economic
phenomena of all the human past and all the rest of the
human present. He himself exhibits much capacity for such
historical research, and in particular has thrown real light
on the less-noticed economic and social effects of the institu-
tion of money, and on the creation of capital in the -earlier
stages of society. But his principal efficacy has been in
reducing, by the considerations we have mentioned, still
further than his predecessors had done, our conceptions of
the work which the a priori method can do. He in fact
dispelled the idea that it can ever supply the branch of general
Sociology which deals with wealth. As to the relations of
economics to the other sides of Sociology, he holds that the
" abstract " science rightly ignores them. It does not consider
the differences of human wants, or the social results of their
several gratifications, except so far as these affect the pro-
duction of wealth. In its view " a pot of beer and a picture
— a book of religion and a pack of cards — are equally worthy
of regard." It therefore leaves the ground open for a science
which will, on the one hand, study wealth as a social fact in
all its successive forms and phases, and, on the other, will

p

226 POLITICAL ECONOMY.

regard it in its true light as an instrument for the conservation
and evolution — moral as well as material — of human societies.

Though it will involve a slight digression, it is desirable
here to notice a further attenuation of the functions of the
deductive method, which is well pointed out in Mr. Sidgwick's
remarkable work on political economy. He observes that,
whilst J. S. Mill declares that the method a priori is the
true method of the science, and that " it has been so under-
stood and taught by all its most distinguished teachers," he
yet himself in the treatment of production followed an in-
ductive method (or at least one essentially different from the
deductive), obtaining his results by "merely analysing and
systematising our common empirical knowledge of the facts of
industry." To explain this characteristic inconsistency, Mr.
Sidgwick suggests that Mill, in making his general statement
as to method, had in contemplation only the statics of distri-
bution and exchange. And in this latter field Mr. Sidgwick
holds that the a priori method, if it be pursued with caution,
if the simplified premises be well devised and the conclusions
" modified by a rough conjectural allowance " for the elements
omitted in the premises, is not, for the case of a developed
industrial society, " essentially false or misleading. " Its con-
clusions are hypothetically valid, though "its utility as a
means of interpreting and explaining concrete facts depends
on its being used with as full a knowledge as possible of the
results of observation and induction." We do not think this
statement need be objected to, though we should prefer to
regard deduction from hypothesis as a useful occasional logical
artifice, and, as such, perfectly legitimate in this as in other
fields of inquiry, rather than as the main form of method in
any department of economics. Mr. Sidgwick, by his limita-
tion of deduction in distributional questions to "a state of
things taken as the type to which civilised society generally
approximates," seems to agree with Bagehot that for times
and places which do not correspond to this type the historical
method must be used — a method which, be it observed, does

THE HISTORICAL SCHOOL. 227

not exclude, but positively implies, "reflective analysis" of
the facts, and their interpretation from " the motives of human
agents " as well as from other determining conditions. In the
dynamical study of wealth— of the changes in its distribution
no less than its production — Mr. Sidgwick admits that the
method a priori "can occupy but a very subordinate place."
We should say that here also, though to a less extent, as a logi-
cal artifice it may sometimes be useful, though the hypotheses
assumed ought not to be the same that are adapted to a mature
industrial stage. But the essential organ must be the historical
method, studying comparatively the different phases of social
evolution.

Connected with the theory of modern industry is one sub-
ject which Bagehot treated, though only in an incidental way,
much more satisfactorily than his predecessors, — namely, the
function of the entrepreneur, who in Mill and Cairnes is
scarcely recognised except as the owner of capital. It is quite
singular how little, in the Leading Principles of the latter,
his active co-operation is taken into account. Bagehot objects
to the phrase "wages of superintendence," commonly used to
express his " reward," as suggesting altogether erroneous ideas
of the nature of his work, and well describes the large and
varied range of his activity and usefulness, and the rare com-
bination of gifts and acquirements which go to make up the
perfection of his equipment. It can scarcely be doubted that
a foregone conclusion in favour of the system of (so-called) co-
operation has sometimes led economists to keep these important
considerations in the background. They have been brought
into due prominence of late in the treatises of Profs. Marshall
and F. A. Walker, who, however, have scarcely made clear, and
certainly have not justified, the principle on which the amount
of the remuneration of the entrepreneur is determined.

We have seen that Jones had in his dogmatic teaching
anticipated in some degree the attitude of the new school;
important works had also been produced, notably by Thomas
Tooke and William Newmarch (History of Prices, 1838-1857),

*28 POLITICAL ECONOMY.

and by James E. Thorold Rogers (History of Agricultut 6 and
Prices in England, I866-82),1 on the course of English econo-
mic history. But the first systematic statement by an English
writer of the philosophic foundation of the historical method,
as the appropriate organ of economic research, is to be found
in an essay by T. E. Cliffe Leslie (printed in the Dublin
University periodical, Hermathena, 1876 ; since included in his
Essays Moral and Political, 1879). This essay was the most
important publication on the logical aspect of economic science
which had appeared since Mill's essay in his Unsettled Ques-
tions ; though Cairnes had expanded and illustrated the views
of Mill, he had really added little to their substance. Leslie
takes up a position directly opposed to theirs. He criticises
with much force and verve the principles and practice of the
" orthodox " school. Those who are acquainted with what
has been written on this subject by Knies and other Germans
will appreciate the freshness and originality of Leslie's treat-
ment. He points out the loose and vague character of the
principle to which the classical economists profess to trace
back all the phenomena with which they deal — namely, the
"desire of wealth." This phrase really stands for a variety of
wants, desires, and sentiments, widely different in their nature
and economic effects, and undergoing important changes (as,
indeed, the component elements of wealth itself also do) in
the several successive stages of the social movement. The
truth is that there are many different economic motors, altru-
istic as well as egoistic ; and they cannot all be lumped to-
gether by such a coarse generalisation. The a priori and
purely deductive method cannot yield an explanation of the
causes which regulate either the nature or the amount of
wealth, nor of the varieties of distribution in different social
systems, as, for example, in those of France and England.
"The whole economy of every nation is the result of a long
evolution in which there has been both continuity and change,

i Mr. Rogers has since continued this work, and has also published
The First Nine Years of the Bank of England, 1887.

THE HISTORICAL SCHOOL. 229

and of which, the economical side is only a particular aspect.
And the laws of which it is the result must be sought in
history and the general laws of society and social evolution."
The intellectual, moral, legal, political, and economic sides
of social progress are indissolubly connected. Thus, juridical
facts relating to property, occupation, and trade, thrown up by
the social movement, are also economic facts. And, more
generally, " the economic condition of English " or any other
" society at this day is the outcome of the entire movement
which has evolved the political constitution, the structure of
the family, the forms of religion, the learned professions, the
arts and sciences, the state of agriculture, manufactures, and
commerce." To understand existing economic relations we
must trace their historical evolution ; and " the philosophical
method of political economy must be one which expounds that
evolution." This essay was a distinct challenge addressed to
the ideas of the old school on method, and, though its conclu-
sions have been protested against, the arguments on which they
are founded have never been answered.

With respect to the dogmatic generalisations of the " ortho-
dox " economists, Leslie thought some of them were false, and
all of them required careful limitation. Early in his career
he had shown the hollowness of the wage-fund theory, though
he was not the first to repudiate it.1 The doctrine of an
average rate of wages and an average rate of profits he rejected
except under the restrictions stated by Adam Smith, which
imply a " simple and almost stationary condition " of the
industrial world. He thought the glib assumption of an
average rate of wages, as well as of a wage-fund, had done
much harm " by hiding the real rates of wages, the real causes
which govern them, and the real sources from which wages
proceed." The facts, which he laboriously collected, he found

1 That service was due to F. D. Longe (Refutation of the Wage-Fund
Theory of Modern Political Economy, 1866). Leslie's treatment of the
subject was contained in an article of Fraser's Magazine for July 1868,
reprinted as an appendix to his Land-Systems and Industrial Economy
of Ireland, England, and Continental Countriet, 18701

2jo POLITICAL ECONOMY.

to be everywhere against the theory. In every country there
is really " a great number of rates ; and the real problem is,
What are the causes which produce these different rates?"
As to profits, he denies that there are any means of knowing
the gains and prospects of all the investments of capital, and
declares it to be a mere fiction that any capitalist surveys the
whole field. Bagehot, as we saw, gave up the doctrine of a
national level of wages and profits except in the peculiar case
of an industrial society of the contemporary English type ;
Leslie denies it even for such a society. With this doctrine,
that of cost of production as determining price collapses, and
the principle emerges that it is not cost of production, but
demand and supply, on which domestic, no less than inter-
national, values depend, — though this formula will require
much interpretation before it can be used safely and with
advantage. Thus Leslie extends to the whole of the national
industry the partial negation of the older dogma introduced
by Cairnes through the idea of non-competing groups. He
does not, of course, dispute the real operation of cost of pro-
duction on price in the limited area within which rates of
profit and wages are determinate and known ; but he main-
tains that its action on the large scale is too remote and un-
certain to justify our treating it as regulator of price. Now,
if this be so, the entire edifice which Ricardo reared on the
basis of the identity of cost of production and price, with its
apparent but unreal simplicity, symmetry, and completeness,
disappears ; and the ground is cleared for the new structure
which must take its place. Leslie predicts that, if political
economy, under that name, does not bend itself to the task of
rearing such a structure, the office will speedily be taken out
of its hands by Sociology.

Leslie was a successful student of several special economic
subjects — of agricultural economy, of taxation, of the distribu-
tion of the precious metals and the history of prices, and, as
has been indicated, of the movements of wages. But it is
in relation to the method and fundamental doctrines of the

THE HISTORICAL SCHOOL. 231

science that he did the most important, because the most
opportune and needful work. And, though his course was
closed too early for the interests of knowledge, and much of
what he produced was merely occasional and fragmentary, his
services will be found to have been greater than those of
many who have left behind them more systematic, elaborate,
and pretentious writings.

One of the most original of recent English writers on Poli-
tical Economy was W. Stanley Jevons (1835-1882). The
combination which he presented of a predilection and aptitude
for exact statistical inquiry with sagacity and ingenuity in the
interpretation of the results was such as might remind us of
Petty. He tended strongly to bring economics into close re-
lation with physical science. He made a marked impression
on the public mind by his attempt to take stock of our re-
sources in the article of coal. His idea of a relation between
the recurrences of commercial crises and the period of the sun-
spots gave evidence of a fertile and bold scientific imagination,
though he cannot be said to have succeeded in establishing
such a relation. He was author of an excellent treatise on
Money and the Mechanism of Exchange (1875), an(^ °f various
essays on currency and finance, which have been collected
since his death, and contain vigorous discussions on subjects
of this nature, as on bimetallism (with a decided tendency in
favour of the single gold standard), and several valuable sug-
gestions, as with respect to the most perfect system of currency,
domestic and international, and in particular the extension of
the paper currency in England to smaller amounts. He pro-
posed in other writings (collected in Methods of Social Reform,
1883) a variety of measures, only partly economic in their
character, directed especially to the elevation of the working
classes, one of the most important being in relation to the
conditions of the labour of married women in factories. This
was one of several instances in which he repudiated the laisser
faire principle, which indeed, in his book on The State in
Relation to Labour (1882), he refuted in the clearest and

I32 POLITICAL ECONOMY.

most convincing way, without changing the position he had
always maintained as an advocate of free trade. Towards the
end of his career, which was prematurely terminated, he was
more and more throwing off "the incubus of metaphysical
ideas and expressions " which still impeded the recognition or
confused the appreciation of social facts. He was, in his own
words, ever more distinctly coming to the conclusion "that
the only hope of attaining a true system of economics is to
fling aside, once and for ever, the mazy and preposterous as-
sumptions of the Kicardian school." With respect to method,
though he declares it to he his aim to " investigate inductively
the intricate phenomena of trade and industry," his views had
not perhaps assumed a definitive shape. The editor of some of
his remains declines to undertake the determination of his
exact position with respect to the historical school. The
fullest indications we possess on that subject are to be found
in a lecture of 1876, On the Future of Political Economy. He
saw the importance and necessity in economics of historical
investigation, a line of study which he himself was led by
native bent to prosecute in some directions. But he scarcely
apprehended the full meaning of the historical method, which
Ke erroneously contrasted with the "theoretical," and appa-
rently supposed to be concerned only with verifying and illus-
trating certain abstract doctrines resting on independent bases.
Hence, whilst he declared himself in favour of " thorough re-
form and reconstruction," he sought- to preserve the a priori
mode of proceeding alongside of, and concurrently with, the
historical. Political economy, in fact, he thought was breaking
up and falling into several, probably into many, different
branches of inquiry, prominent amongst which would be the
"theory" as it had descended from his best predecessors,
especially those of the French school, whilst another would
be the " historical study," as it was followed in England by
Jones, Rogers, and others, and as it had been proclaimed in
general principle by his contemporary Cliffe Leslie. This waa
one of those eclectic views which have no permanent validity,

THE HISTORICAL SCHOOL. 233

but are useful in facilitating a transition. The two methods
will doubtless for a time coexist, but the historical will inevi-
tably supplant its rival. What Jevons meant as the " theory "
he wished to treat by mathematical methods (see his Theory of
Political Economy, 1871 ; 2d ed., 1879). This project had, as
we have seen, been entertained and partially carried into effect
by others before him, though he unduly multiplies the number
of such earlier essays when, for example, he mentions Kicardo
and J. S. Mill as writing mathematically because they some-
times illustrated the meaning of their propositions by dealing
with definite arithmetical quantities. Such illustrations, of
which a specimen is supplied by Mill's treatment of the sub-
ject of international trade, have really nothing to do with the
use of mathematics as an instrument for economic research,
or even for the co-ordination of economic truths. We have
already, in speaking of Cournot, explained why, as it seems
to us, the application of mathematics in the higher sense to
economics must necessarily fail, and we do not think that it
succeeded in Jevons's hands. His conception of " final utility "
is ingenious. But it is no more than a mode of presenting
the notion of price in the case of commodities homogeneous in
quality and admitting of increase by infinitesimal additions ;
and the expectation of being able by means of it to subject
economic doctrine to a mathematical method will be found
illusory. He offers1 as the result of a hundred pages of
mathematical reasoning what he calls a " curious conclusion," 2
in which " the keystone of the whole theory of exchange and
of the principal problems of economics lies." This is the pro-
position that " the ratio of exchange of any two commodities
will be the reciprocal of the ratio of the final degrees of utility
of the quantities of commodity available for consumption after
the exchange is completed." Now as long as we remain in
the region of the metaphysical entities termed utilities, this
theorem is unverifiable and indeed unintelligible, because we

1 Theory of Political Economy, 2d ed., p. 103.
* Fortnightly Review for November 1876, p. 617.

234 POLITICAL ECONOMY.

have no means of estimating quantitatively the mental impres.
sion of final, or any other, utility. But when we translate it
into the language of real life, measuring the " utility " of any-
thing to a man by what he will give for it, the proposition is
at once seen to be a truism. What Jevons calls " final utility ''
being simply the price per unit of quantity, the theorem states
that, in an act of exchange, the product of the quantity of the
commodity given by its price per unit of quantity (estimated
in a third article) is the same as the corresponding product for
the commodity received — a truth so obvious as to require no
application of the higher mathematics to discover it. If we
cannot look for results more substantial than this, there is not
much encouragement to pursue such researches, which will in
fact never be anything more than academic playthings, and
which involve the very real evil of restoring the " metaphysical
ideas and expressions " previously discarded. The reputation
of Jevons as an acute and vigorous thinker, inspired with
noble popular sympathies, is sufficiently established. But the
attempt to represent him, in spite of himself, as a follower and
continuator of Ricardo, and as one of the principal authors of
the development of economic theory (meaning by "theory"
the old a priori doctrine) can only lower him in estimation by
placing his services on grounds which will not bear criticism.
His name will survive in connection, not with new theoretical
constructions, but with his treatment of practical problems,
his fresh and lively expositions, and, as we have shown, his
energetic tendency to a renovation of economic method.

Arnold Toynbee (1852-1883), who left behind him a
beautiful memory, filled as he was with the love of truth and
an ardent and active zeal for the public good, was author of
some fragmentary or unfinished pieces, which yet well deserve
attention both for their intrinsic merit and as indicating the
present drift of all the highest natures, especially amongst our
younger men, in the treatment of economic questions.1 He

1 See his Lecture* on the Industrial Revolution in England, with Memoir
by the Master of Balliol, 1884 ; 2d ed., 1887.

THE HISTORICAL SCHOOL. 235

had a belief in the organising power of democracy which it
IB not easy to share, and some strange ideas due to youthful
enthusiasm, such as, for example, that Mazzini is "the true
teacher of our age;" and he fluctuates considerably in his
opinion of the Eicardian political economy, in one place
declaring it to be a detected " intellectual imposture," whilst
elsewhere, apparently under the influence of Bagehot, he
speaks of it as having been in recent times " only corrected,
re-stated, and put into the proper relation to the science of
life," meaning apparently, by this last, general sociology. He
saw, however, that our great help in the future must come, as
much had already come, from the historical method, to which
in his own researches he gave preponderant weight. Its true
character, too, he understood better than many even of those
who have commended it ; for he perceived that it not merely
explains the action of special local or temporary conditions or
economic phenomena, but seeks, by comparing the stages o)
social development in different countries and times, to " di»
cover laws of universal application." If, as we are told, there
exists at Oxford a rising group of men who occupy a position
in regard to economic thought substantially identical with that
of Toynbee, the fact is one of good omen for the future of the
science.

AMERICA.

For a long time, as we have already observed, little was done
by America in the field of Economics. The most obvious
explanation of this fact, which holds with respect to philo-
sophical studies generally, is the absorption of the energies
of the nation in practical pursuits. Further reasons are
suggested in two instructive Essays — one by Professor Charles
F. Dunbar in the North American Review, 1876, the other by
Cliffe Leslie in the Fortnightly Review for October 1880.

We have already referred to the Report on Manufactures
by Alexander Hamilton ; and the memorial drawn up by
Albert Gallatin (1832), and presented to Congress from the

236 POLITICAL ECONOMY.

Philadelphia Convention in favour of Tariff reform, deserves
to be mentioned as an able statement of the arguments against
protection. Three editions of the Wealth of Nations appeared
in America, in 1789, 1811, and 1818, and Ricardo's principal
work was reprinted there in 1819. The treatises of Daniel
Raymond (1820), Thomas Cooper (1826), Willard Phillips
(1828), Francis Way land (1837), and Henry Vethake (1838)
made known the principles arrived at by Adam Smith and some
of his successors. Rae, a Scotchman settled in Canada, pub-
lished (1834) a book entitled New Principles of Political
Economy, which has been highly praised by J. S. Mill (bk. i
chap, n), especially for its treatment of the causes which deter-
mine the accumulation of capital. The principal works which
afterwards appeared down to the time of the Civil War were
Francis Bo wen's Principles of Political Economy, 1856, after-
wards entitled American Political Economy, 1870 ; John Bas-
com's Political Economy, 1859 ; and Stephen Col well's Ways
and Means of Payment, 1859. In the period including and
following the war appeared Amasa Walker's Science of Wealth,
1866; 1 8th ed., 1883, and A L. Perry's Elements of Political
Economy, 1866. A. Walker and Perry are free-traders ; Perry
is a disciple of Bastiat. Of Carey we have already spoken at
some length; his American followers are E. Peshine Smith
(A Manual of Political Economy, 1853), William Elder
(Questions of the Day, 1871), and Robert E. Thompson
(Social Science, 1875). The name of no American economist
stands higher than that of General Francis A. Walker (son
of Amasa Walker), author of special works on the Wages
Question (1876) and on Money (1878), as well as of an
excellent general treatise on Political Economy (1883 ; 2d ed.
1887). The principal works on American economic history
are those of A. S. Bolles, entitled Industrial History of tlie
United States (1878), and Financial History of the United
States, 1774—1885, published in 1879 an(^ later years.

The deeper and more comprehensive study of the subject
which has of late years prevailed in America, added to

THE HISTORICAL SCHOOL. 237

influences from abroad, has given rise, there also, to a division
of economists into two schools — an old and a new — similar
to those which we have found confronting each other else-
where. A meeting was held at Saratoga in September 1885,
at which a society was founded, called the American Eco-
nomic Association. The object of this movement was to
oppose the idea that the field of economic research was
closed, and to promote a larger and more fruitful study of
economic questions. The same spirit led to the establishment
of the Quarterly Journal of Economics, published at Boston
for Harvard University. The first article in this Journal was
by C. F. Dunbar, whose review of a Century of American Politi-
cal Economy we have already noticed; and in this article he
set out, in the interest of conciliation, the tendencies of the
two schools.

This division of opinion was manifested in a striking way
by a discussion on the method and fundamental principles
of Economics, which was conducted in the pages of the
periodical entitled Science, and has since been reproduced in
a separate form (Science Economic Discussion, New York,
1886). In this controversy the views of the new school were
expounded and advocated with great ability. The true nature
of economic method, the relativity both of economic institu-
tions and of economic thought, arising from their dependence
on varying social conditions, the close connection of economic
doctrine with contemporary jurisprudence, the necessity of
keeping economics in harmony with social ethics, and the
importance of a study of consumption (denied by J. S. Mill
and others) were all exhibited with remarkable clearness and
force.1 There is every reason to believe with Leslie that

1 The contributors on the side of the new school were Dr. Edwin
R A. Seligman, Professor E. J. James, Professor Richard T. Ely,
Henry C. Adams, Richmond Mayo Smith, and Simon N. Patten. The
representatives of the old school were Professor Simon Newcomb,
F. W. Taussig, and Arthur T. Hadley.

238 POLITICAL ECONOMY.

America will take an active part both in bringing to light
the economic problems of the future and in working out their
solution.

Contemporary English Economists.

It was no part of the plan of the present work to pass judg-
ment on the writings of very recent English authors, — a judgment
which could not in general be final, and which would be subject to
the imputation of bias in a greater degree than estimates of living
writers in foreign countries. But, for the information of the stu-
dent, some opinions may be expressed which scarcely any compe-
tent person would dispute. The best brief exposition of political
economy, substantially in accordance with Mill's treatise, is to
be found in Fawcett's Manual (6th ed., 1884). But those who
admit in part the claims of the new school will prefer Mr. and
Mrs. Marshall's Economics of Industry (26. ed., 1881). Better,
in some respects, than either is the Political Economy oi
the American writer, Francis A. Walker, to which we have
already referred. Other meritorious works are J. E. T. Eogers's
Manual of Political Economy, 1870; John Macdonell's Sur-
vey of Political Economy, 1871 ; and John L. Shad well's
System of Political Economy, 1877. Professor W. E. Hearn'a
Plutology (1864) contains one of the ablest extant treatments
of the subject of production. Mr. Goschen's is the best work
on the foreign exchanges (zoth ed., 1879). Mr. Macleod,
though his general economic scheme has met with no accept-
ance, is recognised as supplying much that is useful on the sub-
ject of banking. Professor Rogers's Six Centuries of Work and
Wages (1884) is the most trustworthy book on the economic
history of England during the period with which he deals.
W. Cunningham's Growth of English Industry and Commerce
(1882) is instructive on the mercantile system. Dr. W.
Neilson Hancock has shown in a multitude of papers a most
extensive and accurate knowledge of the social economy oi
Ireland.

THE HISTORICAL SCHOOL. 239

We cannot here overlook a work like that of Mr. Sidgwick
(1883), to which we have already referred on a special point.
It is impossible not to respect and admire the conscientious
and penetrating criticism which he applies to the a priori
system of economics in its most mature form. But it is open
to question whether the task was wisely undertaken. It
cannot be permanently our business to go on amending and
limiting the Ricardian doctrines, and asking by what special
interpretations of phrases or additional qualifications they may
still be admitted as having a certain value. The time for a
new construction has arrived ; and it is to this, or at least to
the study of its conditions, that competent thinkers with the
due scientific preparation should now devote themselves. It
is to be feared that Mr. Sidg wick's treatise, instead of, as
he hopes, " eliminating unnecessary controversy," will tend to
revive the steriles contestations and oiseuses disputes de mots,
which Comte censured in the earlier economists. It is in-
teresting to observe that the part of the work which is, and
has been recognised as, the most valuable is that in which,
shaking off the fictions of the old school, he examines inde-
pendently by the light of observation and analysis the question
of the industrial action of Governments.

CHAPTER VII

CONCLUSION.

LET us briefly consider in conclusion, by the light of the
preceding historical survey, what appear to be the steps in
the direction of a renovation of economic science which are
now at once practicable and urgent.

I. Economic investigation has hitherto fallen for the most
part into the hands of lawyers and men of letters, not into
those of a genuinely scientific class. Nor have its cultivators
in general had that sound preparation in the sciences of
inorganic and vital nature which is necessary whether as
supplying bases of doctrine or as furnishing lessons of method.
Their education has usually been of a metaphysical kind.
Hence political economy has retained much of the form and
spirit which belonged to it in the seventeenth and eighteenth
centuries, instead of advancing with the times, and assuming
a truly positive character. It is homogeneous with the school
logic, with the abstract unhistorical jurisprudence, with the
a priori ethics and politics, and other similar antiquated sys-
tems of thought ; and it will be found that those who insist
most strongly on the maintenance of its traditional character
have derived their habitual mental pabulum from those regions
of obsolete speculation. We can thus understand the attitude
of true men of science towards this branch of study, which
they regard with ill-disguised contempt, and to whose pro-
fessors they either refuse or very reluctantly concede a place
in theii brotherhood.

CONCLUSION. 241

The radical vice of this unscientific character of political
economy seems to lie in the too individual and subjective
aspect under which it has been treated. Wealth having been
conceived as what satisfies desires, the definitely determinable
qualities possessed by some objects of supplying physical
energy, and improving the physiological constitution, are left
out of account. Everything is gauged by the standard of sub-
jective notions and desires. All desires are viewed as equally
legitimate, and all that satisfies our desires as equally wealth.
Value being regarded as the result of a purely mental appre-
ciation, the social value of things in the sense of their objec-
tive utility, which is often scientifically measurable, is passed
over, and ratio of exchange is exclusively considered. The
truth is, that at . the bottom of all economic investigation
must lie the idea of the destination of wealth for the mainte-
nance and evolution of a society. And, if we overlook this,
our economics will become a play of logic or a manual for
the market, rather than a contribution to social science;
whilst wearing an air of completeness, they will be in truth
one-sided and superficial. Economic science is something
far larger than the Catallactics to which some have wished
to reduce it. A special merit of the physiocrats seems to
have lain in their vague perception of the close relation of
their study to that of external nature ; and, so far, we must
recur to their point of view, basing our economics on physics
and biology as developed in our own time.1 Eurther, the
science must be cleared of all the theologico-metaphysical
elements or tendencies which still encumber and deform it.
Teleology and optimism on the one hand, and the jargon of
"natural liberty" and "indefeasible rights" on the other,
must be finally abandoned.

Nor can we assume as universal premises, from which
economic truths can be deductively derived, the convenient

1 This aspect of the subject has been ably treated in papers contributed
to the Proceedings of the Royal Society of Edinburgh on several occasion*
during and since i8Si by Mr. P. Geddea, well known aa a biologist.

142 POLITICAL ECONOMY.

formulas which have heen habitually employed, such as that
all men desire wealth and dislike exertion. These vague
propositions, which profess to anticipate and supersede social
experience, and which necessarily introduce the absolute where
relativity should reign, must he laid aside. The laws of
wealth (to reverse a phrase of Buckle's) must be inferred from
the facts of wealth, not from the postulate of human selfish-
ness. We must bend ourselves to a serious direct study of
the way in which society has actually addressed itself and now
addresses itself to its own conservation and evolution through
the supply of its material wants. What organs it has developed
for this purpose, how they operate, how they are affected by
the medium in which they act and by the coexistent organs
directed to other ends, how in their turn they react on those
latter, how they and their functions are progressively modi-
fied in process of time — these problems, whether statical or
dynamical, are all questions of fact, as capable of being studied
through observation and history as the nature and progress
of human language or religion, or any other group of social
phenomena. Such study will of course require a continued
" reflective analysis " of the results of observation ; and, whilst
eliminating all premature assumptions, we shall use ascertained
truths respecting human nature as guides in the inquiry and
aids towards the interpretation of facts. And the employment
of deliberately instituted hypotheses will be legitimate, but
only as an occasional logical artifice.

II. Economics must be constantly regarded as forming only
one department of the larger science of Sociology, in vital
connection with its other departments, and with the moral syn-
thesis which is the crown of the whole intellectual system.
We have already sufficiently explained the philosophical
grounds for the conclusion that the economic phenomena of
society cannot be isolated, except provisionally, from the rest, —
that, in fact, all the primary social elements should be habi-
tually regarded with respect to their mutual dependence and
reciprocal actions. Especially must we keep in view the high

CONCLUSION. 243

moral issues to which the economic movement is subservient,
and in the absence of which it could never in any great degree
attract the interest or fix the attention either of eminent
thinkers or of right-minded men. The individual point of
view will have to be subordinated to the social ; each agent
will have to be regarded as an organ of the society to which
he belongs and of the larger society of the race. The con-
sideration of interests, as George Eliot has well said, must
give place to that of functions. The old doctrine of right,
which lay at the basis of the system of " natural liberty," has
done its temporary work ; a doctrine of duty will have to be
substituted, fixing on positive grounds the nature of the social
co-operation of each class and each member of the community,
and the rules which must regulate its just and beneficial
exercise.

Turning now from the question of the theoretic constitu-
tion of economics, and viewing the science with respect to its
influence on public policy, we need not at the present day
waste words in repudiating the idea that "nongovernment"
in the economic sphere is the normal order of things. The
laisser faire doctrine, coming down to us from the system of
natural liberty, was long the great watchword of economic
orthodoxy. It had a special acceptance and persistence in
England in consequence of the political struggle for the
repeal of the corn laws, which made economic discussion in
this country turn almost altogether on free trade — a state of
things which was continued by the effort to procure a modifi-
cation of the protective policy of foreign nations. But it has
now for some time lost the sacrosanct character with which
it was formerly invested. This is a result not so much of
scientific thought as of the pressure of practical needs — a cause
which has modified the successive forms of economic opinion
more than theorists are willing to acknowledge. Social exi-
gencies will force the hands of statesmen, whatever their
attachment to abstract formulas ; and politicians have practi-
cally turned their backs on laisser faire. The State has with

244 POLITICAL ECONOMY.

excellent effect proceeded a considerable way in the direction
of controlling, for ends of social equity or public utility, the
operations of individual interest. The economists themselves
have for the most part been converted on the question;
amongst theorists Herbert Spencer found himself almost
a vox clamantis in deserto in protesting against what he
called the "new slavery" of Governmental interference. He
will protest in vain, so far as he seeks to rehabilitate the
old absolute doctrine of the economic passivity of the State.
But it is certainly possible that even by virtue of the
force of the reaction against that doctrine there may be
an excessive or precipitate tendency in the opposite direction.
With the course of production or exchange considered in
itself there will probably be in England little disposition
to meddle. But the dangers and inconveniences which arise
from the unsettled condition of the world of labour will
doubtless from time to time here, as elsewhere, prompt to
premature attempts at regulation. Apart, however, from the
removal of evils which threaten the health of the workers or the
public peace, and from temporary palliatives to ease off social
pressure, the right policy of the State in this sphere will for the
present be one of abstention. It is indeed certain that industrial
society will not permanently remain without a systematic organi-
sation. The mere conflict of private interests will never pro-
duce a well-ordered commonwealth of labour. Freiheit ist
Jceine Losung. Freedom is for society, as for the individual,
the necessary condition precedent of the solution of practical
problems, both as allowing natural forces to develop themselves
and as exhibiting their spontaneous tendencies ; but it is not
in itself the solution. Whilst, however, an organisation of
the industrial world may with certainty be expected to arise
in process of time, it would be a great error to attempt to
improvise one. We are now in a period of transition. Our
ruling powers have still an equivocal character ; they are not
in real harmony with industrial life, and are in all respects
imperfectly imbued with the modern spirit. Besides, the

CONCLUSION. 245

conditions of the new order are not yet sufficiently understood.
The institutions of the future must be founded on sentiments
and habits, and these must be the slow growth of thought
and experience. The solution, indeed, must be at all times
largely a moral one ; it is the spiritual rather than the ten>
poral power that is the natural agency for redressing or
mitigating most of the evils associated with industrial life.1
In fact, if there is a tendency — and we may admit that such
a tendency is real or imminent — to push the State towards an
extension of the normal limits of its action for the maintenance
of social equity, this is doubtless in some measure due to the
fact that the growing dissidence on religious questions in the
most advanced communities has weakened the authority of
the Churches, and deprived their influence of social universality.
What is now most urgent is not legislative interference on
any large scale with the industrial relations, but the formation,
in both the higher and lower regions of the industrial world,
of profound convictions as to social duties, and some more
effective mode than at present exists of diffusing, maintaining,
and applying those convictions. This is a subject into which
we cannot enter here. But it may at least be said that the
only parties in contemporary public life which seem rightly
to conceive or adequately to appreciate the necessities of the
situation are those that aim, on the one hand, at the restora-
tion of the old spiritual power, or, on the other, at the forma-
tion of a new one. And this leads to the conclusion that
there is one sort of Governmental interference which the
advocates of laisser faire have not always discountenanced,
and which yet, more than any other, tends to prevent the
gradual and peaceful rise of a new industrial and social

1 The neglect of this consideration, and the consequent undue exalta-
tion of State action, which, though quite legitimate, is altogether in-
sufficient, appears to be the principal danger to which the contemporary
German school of economists is exposed. When Schm oiler says, "The
State is the grandest existing ethical institution for the education of the
human race," he transfers to it the functions of the Church. The educa-
tional action of the State must be, in the main, only indirect.

246 POLITICAL ECONOMY.

system, — namely, the interference with spiritual liberty by
setting up official types of philosophical doctrine, and imposing
restrictions on the expression and discussion of opinions.

It will be seen that our principal conclusion respecting
economic action harmonises with that relating to the theoretic
study of economic phenomena. For, as we held that the
latter could not be successfully pursued except as a duly
subordinated branch of the wider science of Sociology, so in
practical human affairs we believe that no partial synthesis is
possible, but that an economic reorganisation of society implies
a universal renovation, intellectual and moral no less than
material. The industrial reformation for which western
Europe groans and travails, and the advent of which is in-
dicated by so many symptoms (though it will come only as
the fruit of faithful and sustained effort), will be no isolated
fact, but will form part of an applied art of life, modifying
our whole environment, affecting our whole culture, and
regulating our whole conduct — in a word, directing all our
resources to the one great end of the conservation and de-
velopment of Humanity.

INDEX.

ANDERSON, 126

Aria to tie, 15, 17, 22, 99

BABBAGE, 141

Bacon, 47

Baden, Karl Friedrich von, 80

Bagehot, 135, 223-227

Bain, 149, 153

Bandini, 70

Banfield, 141

Bastable, 103, 161

Bastiat, 167, 170, 175-180

Bntbie, 219

Baudrillart, 219, 221

Beccaria, 71, 73, 74

Belloni, 71

Bentham, no, in

Bernbardi, 214

Berkeley, 82

Bianchini, 184

Blanqui, xiv., 86, 2x8

Boccardo, 183

Bodin, 43, 44, 46

Bohmert, von, 214

Boisguillebert, 57, 59

Bolles, 236

Bonar, 122

Bowen, 236

Brassey, 160

Breutano, 207, 2x4

Broggia, 71

Buchanan, 109, 129

Buckle, 61, 90, 242

Burke, 190

CAIRNES, 106, 123, 134, cs4-i62,

178, 224
Campanella, 46
Campomanes, 78
Canning, 146
Cantillon, 60, 6x

Carey, 171-175

Carli, 21, 75

Carlyle, 67, 82

Cato, 20, 22

Chalmers, 121, 141

Charles V., 41

Cherbuliez, 157, 221

Chevalier, 220

Child, 41, 48, 49, 52, 54, «7

Cibrario, 183

Cicero, 19, 20, 22

Clement, 41, 219

Cognetti de Martiis, 217

Cohn, 215

Coke, 52

Colbert, 41, 42, 57, 63

Colmeiro, xv.

Columella, 20, 21, 22

Comte, Auguste, 196-200, and peusim

Comte, Charles, 177

Condorcet, 112-114

Contzen, 31

Copernicus, 46

Coquelin et Guillaumin, viii.

Cossa, viii., 216, 217

Courcelle-Seneuil, 221

Cournot, 180-182

Cousin, 218

Cromwell, 41

Crumpe, 141

Culpeper, 48, 67

Cunningham, 238

Custodi, viii., 78

Cusumano, 31, 216

DAIBE, viii., 53
D'Alembert, 66
Dalrymple, 92
Darwin, 121
Davanzati, 43
Davenant, 49, 67
De Quincey, 136
Diderot, 56, 66, 107

INDEX.

Dietzel, 215

Digges, 48

Droz, 220

Duhring, xiv., 22, 214

Dunbar, 235, 237

Dunoyer, 168-170

Dupont de Nemours, 61, 66, 68, 86,

105, 164
Dutot, 60

ElSENHABT, Xiv. '

Eliot, George, 243
Elizabeth, Queen, 41
Ernertou, no
Emmingnaus, 214

FAWCKTT, 147, 160, 238
Fenelon, 60
Ferguson, 92, 109
Ferrara, 183
Ferraris, 217
Filaugieri, 75
Fontenay, 176, 177
Forbonnais, 78
Forti, 217
Fortrey, 48, 52
Foster, 161
Franklin, 76, 81, 115, 170

GALIANI, 46, 69, 72, 73, 75

Gamier, Germain, 162, 220

Gamier, Joseph, 221

Garve, 184

Geddes, 222, 241

Gee, 67

Genovesi, 71, 76, 81

Gentz, 185, 190

Gioja, 183

Gladstone, 146

Godwin, 112, 113

Goethe, 81

Goschen, 238

Gossen, 180

Gournay, 60, 61, 66, 67

Grimm, 70, 72

HAMILTON, 171
Hancock, 238
Hearn, 238
Held, 135, 207, 214
Henry VIIL, 41
Hermann, 185, 186
Hesiod, ix
Hildebrand, 107, 202
Hobbes, 51, 54, 61

Huet, 77

Hufeland, 185

Hugo, 201

Hume, 53, 70, 83, 85, 100, KM,

107, 108, 115, 123, 128
Huskisson, 146
Hutcheson, 61
Hutchinson, 141

INTIBRI, 71, 72

JAKOB, von, 185

Jevons, 60, 159, 180,231-234

Jones, 142-145, 224

Jourdain, 29

Jovellanos, 184

Joyce, no

Justi, 80

Justinian, 21

KAIMES, 92

Kautz, xiv.

Knies, 101, 203-205, 214

Kraus, 185

Kries, 207

LA BRUYERE, 65

Lalor, 222

Lampertico, 216, 217

Laspeyres, ix.

Lfcssalle, 210

Lauderdale, no, in, 151

Laughlin, 148

Laveleye, De, 217, 219, 020

Lavergne, 219

Law, 60

Lawson, 142

Leibnitz, 53

Leroy-Beaulieu, 178, 213

Leslie, T. E. Cliffe, 61, 91, 9*, til,

149, 160, 175, 228-231
Lilientield, 212
List, 171, 175, 176, 191-194
Livy, 19

Locke, 53, 54, 82, 100
Longe, 159, 229
Longfield, 141
Loria, 216
Lotz, 185
Liider, 185
Luzzatti, 216, 217

MACATJLAY, 149

M'Culloch, xiv., 105, 109, i»6, 13!,
146

INDEX.

*49

Maodonell, 238

Maoleod, 338

Males troit, 43

Maltkus, 76, 78, 112-122, 135, 137,

142

Malynes, 48

Marshall, Alfred, HI, 327, 238
Marshall, Mary P., 238
Martineau, Harriet, 140, 222
Melon, 60
Menger, 215
Mengotti, 41, 77
Mercier-Lariviere, 68, 69
Merivale, 141
Messedaglia, 216
Meyer, xv.

Mill, James, 117, 138, 149
Mill, John Stuart, 146-154, and

passim
Millar, 93
Minghetti, 216
Mirabeau, 66-68, 76
Misselden, 48
Moser, 81
Montaigne, 44
Montchre'tien, 47
Montesquieu, 60, 90-93, xaa 115
More, 44
Morellet, 69, 70
Morley, 150
Miiller, 189-191
Mun, 41, 46, 47

NASSE, 207, 208, 9x4

Nazzani, 216
Nebenius, 185
Neri, 21, 75
Newmarch, 237
Neymarck, 219
Nicholson, 106, no, 133
North, 52, 53

ONCKEN, 65
Oppenheim, 211
Oresme, 36
Ortes, 77, 81
Ortez, 184

PAGNINI, 21
Paillottet, 176
Paoletti, 76
Pecchio, xir., 71, 79
Peel, 140
Perin, 219
Petty, 51, 53, 67
Pitt, no

Plato, 12-14, 22» 44
Playfair, 109

Pliny, 19, so
Pollexfen, 48
Price, 115
Prince-Smith, 314
Pulteney, no

QDESNAY, 60, 61, 64-67, 70, 88, xo$

RAE, 236

Raleigh, 41, 49

Rau, 185

Raynal, 76

Ricardo, 106, 122-137, 143, 145

Ricca-Salerno, 216, 217

Ricci, 76

Rinuccini, 72

Robertson, 78

Rogers, 109, 228, 238

Romagnosi, 183

Roscher, ix., 23, 201, 202, 206, and

passim

Rosier, 207, 314
Rossi, 220

Rousseau, 20, 56, 6l
Ruskin, 222

•SAMTER, 2x2

Sartorius, 185

Savigny, 200, 201

Say, J. B., 2, 163-165, 189

Sax, 215

Scaruffi, 43

Schaffle, 207, 209, 211, 212, 2x4

Scheel, Ton, xiv., 207, 212, 214

Schiattarella, 217

Schlozer, 188

Schmalz, 80

Schmoller, 207, 214, 245

Schonberg, xiv., 207, six, 213

Schulze-Delitzsch, 214

Scialoja, 183

Seneca, 20, 22

Senior, 115, 116, 123, 130, 138-140

Serra, 46

Shad well, 238

Sidgwick, 146, 221, 226, 239

Sismondi, 14, 135, 165-168

Smith, Adam, 87-1x0, and pa*tim

Soden, 185

Sonnenfels, 8x

Spencer, 117, 2x2

Stafford, 45

Stein, von, 207, 214

Steuart, 81, 86, 87, 1x5

Stewart, 105

Stirling, 176

250

INDEX.

Storch, 188, 189

TACITUS, 19

Taylor, 188

Temple, 41, 49

Terray, 69

Thomas Aquinas, St., 29

Thornton, W. T., 141, 159

Thtinen, von, 185, 186-188

Tooke, 145, 227

Torrens, 140, 146

Townsend, 115, 116

Toynbee, 234

Tracy, 220

Treitschke, von, 214

Tucker, 53, 86

Turbolo, 43

Turgot, 47, 65, 68, 70, 76, 87, 88, 105,

Twis^ xir.

tTSTARIZ, 78

TARBO, ao

Vasco, 75
Vauban, 59
Verri, 73, 74, 75
villeneuve-Bargemont, XIT.
Voltaire, 56, 59, 69, 73

WAGNER, 207-209, 211

Wakefield, 109, 141

Walker, Amasa, 236

Walker, Francis A., 106, 154, i6a

175, 227, 238
Wallace, 113, 115
Walras, 221
West, 126, 131
Whately, 141, 173
Whewell, 144
Wolowski, 36

XENOPHON, 14

YOUHO, 115

ZI50KE, So

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A history of political .152

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